Earned Income Credit

The Earned Income Tax Credit (EITC) is designed for working taxpayers with lower incomes. The credit was originally enacted in 1975, and over the years has grown to be one of the principal anti-poverty programs in the federal budget.  

For tax year 2009, taxpayers may be able to claim up to $5,657 in EITC credit. However, one in four taxpayers eligible for the credit fail to claim it. Taxpayers who have earned income but are not required to file miss out on this credit.

Things you need to know…

• Your filing status cannot be Married Filing Separate (MFS).
• You (and your spouse and children) must have a valid Social Security Number (SSN).
• You (or your spouse) must have earned income from a job or self-employment.
• You don’t have to have kids to qualify. However, the income limit is much lower for taxpayers without children and age limits apply.
• If you are a member of the military, you can claim your nontaxable combat pay as earned income.
• You 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.
• You cannot be a qualifying child of another person.
• You cannot file Form 2555 or 2555-EZ (Foreign Income).
• You cannot have investment income more than $3,100 during the tax year.

EIC has separate residency rules:  the taxpayer must be a citizen or resident of the United States for the ENTIRE year.  Qualifying child must have lived with the taxpayer IN THE US for at least half of the year (except for illness, school attendance, business, vacation, military service and detention in a juvenile facility).

As with any credit, taxpayers are encouraged to seek out experienced tax preparers to guide them through their returns. Preparers have been trained on the IRS rules, and can answer your questions to ensure an accurate tax return. Preparers can easily calculate the amount of EITC that you are eligible for.

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