Almost forgot that today is Earned Income Tax CreditA tax credit is a provision that reduces a taxpayer’s final tax bill, dollar-for-dollar. A tax credit differs from deductions and exemptions, which reduce taxable income, rather than the taxpayer’s tax bill directly. Awareness Day, as proclaimed by the IRS. From the IRS statement:
An expanded Earned Income Tax Credit (EITC)The Earned Income Tax Credit (EITC) is a refundable tax credit targeted at low-income working families. The credit offsets tax liability, the total amount of tax debt owed by an individual, corporation, or other entity to a taxing authority like the Internal Revenue Service (IRS), and can even generate a refund, with earned income credit amounts calculated on the basis of income and number of children. means larger families will qualify for a larger credit, offering greater relief for people who struggled through difficult financial times last year, the Internal Revenue Service said today.
The IRS and the Treasury Department marked EITC Awareness Day as their partners nationwide worked to highlight the availability of this important taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. credit. EITC, which is in its thirty-fifth year, is one of the federal government’s largest benefit programs for working families and individuals. Last year, nearly 24 million people received $50 Billion in benefits. The average credit was more than $2,000.
“As part of the economic recovery efforts, there have been important changes to expand EITC to benefit taxpayers,” said IRS Commissioner Doug Shulman. “Today, more than ever, hard-working individuals and families can use a little extra help. EITC can make the lives of working people a little easier.”
Eligibility for EITC depends on earned income and family size, among other tests. However, single people and childless workers also are eligible, although for smaller amounts. For tax years 2009 and 2010, the American Recovery and Reinvestment Act created a new category for families with three or more children and expanded the maximum benefit for this category.
To qualify for the EITC, earned income and adjusted gross income (AGI)Adjusted gross income (AGI) is a taxpayer’s total income minus certain “above-the-line” deductions. It is a broad measure that includes income from wages, salaries, interest, dividends, retirement income, Social Security benefits, capital gains, business, and other sources, and subtracts specific deductions. for individuals must each be less than:
$43,279 ($48,279 married filing jointly) with three or more qualifying children
$40,295 ($45,295 married filing jointly) with two qualifying children
$35,463 ($40,463 married filing jointly) with one qualifying child
$13,440 ($18,440 married filing jointly) with no qualifying children
The maximum credit for tax year 2009 is:
$5,657 with three or more qualifying children
$5,028 with two qualifying children
$3,043 with one qualifying child
$457 with no qualifying children
The White House released a statement on it as well, available here.
Regardless of your position on the EITC, it is extremely complicated. In some cases, that is necessary for all the “safeguards” that Congress and the IRS must impose so as to avoid fraud. That being said, the instruction booklet for EITC is 68 pages.Share