The Earned Income Tax Credit: How it Works and Who Qualifies
- December 3, 2021
- Posted by: BenG-Admin
- Category: Blog, IRS, Taxes
The Earned Income Tax Credit (EITC) is a refundable tax credit for low- to moderate-income working families. If you qualify, you can use the Earned Income Tax Credit to reduce the taxes you owe – and maybe increase your refund!
What is Earned Income Tax Credit?
The Earned Income Tax Credit (EITC) reduces income taxes owed by eligible individuals and couples who work but don’t earn enough money to pay their taxes. Earned Income Tax Credit is a refundable tax credit, which means if you qualify for Earned Income Tax Credit and have no taxes to pay, the Earned Income Tax Credit will reduce or eliminate your federal income tax liability. Any amount of Earned Income Tax Credits that exceed the total taxes owed are then sent back in the form of a refund.
Who is Eligible for Earned Income Tax Credit?
To qualify for Earned Income Tax Credit, you must meet certain requirements:
– You must have earned income from working. Earned income includes wages, salaries, tips, and other taxable employee pay. It also includes net self-employment income and farm profits.
– Your adjusted gross income (AGI) must be less than $53,505 ($62,041 if married filing jointly) in 2017.
– You must have a Social Security number or Individual Taxpayer Identification Number (ITIN).
– You must file your taxes using either Form US individual tax return or Form W-Z.
You may be able to claim the Earned Income Tax Credit if you have qualifying children. For more information, see IRS Publication 501: Exemptions, Standard Deduction, and Filing Information.
How Much is the Earned Income Tax Credit?
The amount of Earned Income Tax Credit you can claim depends on your income, filing status, and number of qualifying children. In 2020, the maximum Earned Income Tax Credit for a taxpayer with three or more qualifying children is $6000. The credit can be worth up to $500 per qualifying child.
How do I Claim Earned Income Tax Credit?
To claim Earned Income Tax Credit, file Form US individual tax return or Form W-Z and attach Schedule EIC. You can claim Earned Income Tax Credit whether you file a paper return or electronically. For more information, see IRS Publication 505: Tax Withholding and Estimated Tax.
If you qualify for the Earned Income Tax Credit (EITC), you may be able to use this tax break to reduce your taxes. It’s worth checking out! The EITC is a refundable federal income tax credit that can help working families who have low-to-moderate incomes offset their earnings with credits. You may even find that filing an amended return could increase your refund or lead to getting more money back from Uncle Sam than originally anticipated. So, if you are eligible for the EITC and haven’t filed yet, it’s not too late! Filing an amended return will allow you to claim any additional benefits offered by the IRS.
Here are some helpful links with more information about eligibility requirements and how to claim an EITC on your return. Here
Be sure that you have all required documentation before filing or else there may be penalties associated with any missing paperwork.