Qualifying for the Earned Income Tax Credit

For some people, filing their taxes is like playing  the lottery. They often do not understand the taxing process (no one understands it completely), but they assume that they should be getting some money back. While this is not always the case, the Earned Income Tax Credit does help lower earners either reduce their tax burden or get some money back come tax time. Allan J. Rolnick, a trained tax professional in Forest Hills, New York, knows the ins and outs of the Earned Income Tax Credit, and he can help you get this credit if you qualify.

What is the Earned Income Tax Credit?

The Earned Income Tax Credit (EITC) is a refundable tax credit that is available for low to moderate income earners. In order to get this credit, you must meet certain requirements, and you must actually file a tax return. This applies even if you may not otherwise need to file a tax return or do not owe any income tax.

This credit mean thousands of dollars for some taxpayers that have children, so it is obviously important to most low-income tax payers.

Limitations that Apply to the EITC

Your income must fall under certain limits for you to qualify for the EITC. The earned income limits will depend on your filing status and your total number of dependents. For those who file Single, Head of Household or widowed, their income limits are as follows:

• No qualifying children: $14,820
• One child: $39,131
• Two children: $44,454
• Three or more children: $47,747

If you file as married, the income limits are increased slightly:

• Zero children: $20,330
• One child: $44,651
• Two children: $49,974
• Three or more children: $53,267

The maximum credit amounts for 2015 are:

• $503 with no qualifying children
• $3,359 with one qualifying child
• $5,548 with two qualifying children
• $6,242 with three or more qualifying children

EITC Definitions: What does “earned income” mean?

In order for income to qualify for the earned income credit, it must actually be “earned.” This means that you must have obtained the income from actually working at a job or being self-employed. It does not include payments from unemployment benefits, workers’ compensation, or Social Security. It also does not include investment income (stocks, bonds, pensions, or 401(k) accounts). In fact, your investment income must be below $3,400 to qualify for the earned income credit.

The legislature designed the credit in this way to encourage people to obtain and maintain employment instead of getting state or federal benefits as their only income source. It is meant to be a credit for hardworking families who are just trying to get by.

EITC Definitions: Who are qualifying children?

Only some children will qualify for purposes of the Earned Income Tax Credit. These rules are slightly different than the rules that apply to claim a child as a dependent.

• Relationship: The child must be your son, daughter, adopted child, stepchild, foster child, or grandchild. The child could also be a brother, sister, half-brother, half-sister, stepbrother, stepsister, niece, or nephew.
• Age: The child must be younger than you or your spouse and under 19 years old. As an alternative, the child could be younger than you, under 24, and enrolled as a full time student. Age is not a factor if the child is permanently and totally disabled.
• Residency: The child must actually live with you or your spouse, in the United States, for more than half of the year.

The qualifying child is also not permitted to file a joint tax return, but there are some exceptions to this general rule that your tax preparer can tell you more about. In fact, there are a lot of nuances or exceptions to these very generalized rules. Just because your situation does not fall under these requirements perfectly does not mean that you cannot get the EITC. Speaking with an experienced tax preparer is the best way to determine if you qualify for the EITC.

Did You Receive a Letter from the IRS About the Earned Income Tax Credit?

The IRS sends out notifications to taxpayers about the EITC. Basically, this letter is to encourage you to file a timely tax return so you can use the tax advantage of the Earned Income Tax Credit. The IRS sends these notifications or letters to those who may qualify and urges them to find a tax preparer to help with their tax returns.

You may also receive a letter if there are other changes to your ability to claim the EITC. Allan J Rolnick, a seasoned tax preparer, can help you decipher these letters. He can also help you claim the Earned Income Tax Credit while filing your return. Call (718) 841-7317 for more information. You can also check out his profile below or use the Contact button to get started.