Earned Income Tax Credit Awareness Day

Today is national Earned Income Tax Credit Awareness Day! Earned Income Tax Credit, or EITC, is a credit for hardworking families. One of the great things about it is that it promotes work – the more you work and earn, the more you get back in EITC, up to a certain point. In fact, a goal of EITC is help push people to a point where they are making enough income to not need it anymore.

In the 1980s, Ronald Reagan called the EITC “the best anti-poverty bill, the best pro-family measure, and the best job-creation program ever to come out of the Congress of the United States.”

EITC is literally money that was earned by those who qualify and we hope that anyone who qualifies will claim it this year. Each year, about 20% of Arkansans who qualify do not claim EITC. If even 5% more Arkansans who qualify would claim EITC, another $19 million would be pumped back into the state economy.

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Learn more about EITC and how to claim it if you qualify:

What is the Earned Income Tax Credit (EITC)?
The Earned Income Tax Credit (EITC) is a benefit for working people with low to moderate income. A tax credit puts more money in your pocket, reduces the amount of tax you owe, and may also give you a refund.

How do I know if I qualify?
With the exception of some who receive certain disability income, you must work for someone, or run your own business or farm to qualify for EITC. Workers should see if they qualify for EITC using the EITC Assistant tool at www.irs.gov/eitc.

To claim EITC on your tax return, you must meet all the following rules:

  • You, your spouse (if you file a joint return), and all others listed on Schedule EIC, must have a Social Security number that is valid for employment
  • You must have earned income from working for someone else or owning or running a farm or business
  • Your filing status cannot be married filing separately
  • You must be a U.S. citizen or resident alien all year (If you are a nonresident alien married to a U.S. citizen or resident alien, see Publication 519, U.S. Tax Guide for Aliens)
  • You cannot be a qualifying child of another person
  • You cannot file Form 2555 or Form 2555 EZ (related to foreign earned income)
  • You must meet the earned income, AGI and investment income limits (income limits change each year), see EITC Income Limits for the tax year amounts
  • And you must meet one of the following:
    • Have a qualifying child:
      • Age – Your child must meet one of the following:
        • Be under age 19 at the end of the year and younger than you or your spouse, if you file a joint return
        • Be a full-time student in at least five months of the year and under age 24 at the end of the year and younger than you or your spouse, if you file a joint return
        • Be permanently and totally disabled at any time during the year and any age.
      • Relationship – To be your qualifying child, a child must be your:
        • Son, daughter, adopted child, stepchild, eligible foster child, or a descendant of any of them (for example, your grandchild), or
        • Brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant of any of them (for example, your niece or nephew).
        • Definitions to clarify the relationship test
          • Adopted child. An adopted child is always treated as your own child. This includes a child who was lawfully placed with you for legal adoption.
          • Eligible Foster Child. A person is your eligible foster child if the child is placed with you by an authorized placement agency or by judgment, decree, or other order of any court of competent jurisdiction.
        • Residency
          • Your child must have lived with you, or your spouse if you file a joint return, in the United States for more than half of the year.
        • Joint Return
          • Your child must not have filed a joint return or if your child filed a joint return, your child and his/or her spouse filed only to claim a refund and were not required to file.
        • If you do not have a qualifying child, you must:
          • be age 25 but under 65 at the end of the year,
          • live in the United States for more than half the year, and
          • not qualify as a dependent of another person.

How do I claim the EITC?
If you qualify for EITC, you have to file a tax return with the IRS, even if you owe no tax or are not required to file.

How much money could I get back?
On average, EITC adds $2,400 to refunds. After you know you if qualify for EITC, you can do one of the following things to figure the credit you will receive:

  • Have the IRS figure the credit for you. Follow the instructions for Line 64 a on Form 1040, Line 38a on Form 1040A, or line 8a on Form 1040EZ.
  • Figure the credit yourself. To do this you must use the Earned Income Credit Worksheet (EIC Worksheet) in the instruction booklet for Form 1040, Form 1040A, or Form 1040EZ, and the Earned Income Credit (EIC) Table in the instruction booklet, or use the EITC Assistant Tool It is available in both English and Spanish.

Where can I file?
You can file with any tax preparer, but we encourage those who made less than $58,000 in 2015 to file at one of our free Volunteer Income Tax Assistance sites (find out where they are here) or for free online at myfreetaxes.com.

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