Today Is Earned Income Credit Awareness Day

January 31 has been designated as Earned Income Credit (EIC) Awareness Day by the IRS. According to the IRS, more than 60 percent of tax returns claiming the EIC are filed during the month of February. In addition more than 70% of returns claiming EIC are prepared by tax professionals. PRO-TAX joins with the IRS in attempting to educate consumers on the importance of this often misunderstood credit. 

The IRS distributed more than $43 billion to over 22 million taxpayers for the 2006 tax year. However, one in four taxpayers eligible for the credit fail to claim it. Taxpayers find that the requirements for the credit are complex. Taxpayers who have earned income but are not required to file miss out on this credit. The IRS also states that non-English speakers, non-traditional families, the homeless, childless workers and rural residents often do not know that they qualify for EIC.

For the 2007 tax year, a consumer may be able to take the credit for tax year 2007 if he or she:

• Has more than one qualifying child and earns less than $37,783 ($39,783 if married filing jointly) or
• Has one qualifying child and earns less than $33,241 ($35,241 if married filing jointly) or
• Does not have a qualifying child and earns less than $12,590 ($14,590 if married filing jointly).

In addition the taxpayer:

• Must have a valid Social Security Number
• Must have earned income from employment or from self-employment
• filing status cannot be married filing separately
• Must be a U.S. citizen or resident alien all year, or a nonresident alien married to a U.S. citizen or resident alien and filing a joint return
• Cannot be a qualifying child of another person
• Cannot file Form 2555 or 2555-EZ
• Have investment income for tax year more than $2,900

If the taxpayer does not have a qualifying child, he 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 be a qualifying child of another person

There are additional rules for residency for families claiming dependent children. Members of the military can elect to include their nontaxable combat pay in earned income for the credit.

As with any credit, taxpayers are encouraged to seek out experienced preparers to guide them through these rules. At PRO-TAX our preparers have been trained on the IRS guidelines, and can answer your questions to ensure an accurate tax return.  To find the closest PRO-TAX office click here.

For more information from the IRS click here.

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