The Earned Income Tax Credit (EITC) is a refundable tax credit you may be able to take advantage of this tax season to get the tax relief you need. Since the EITC is refundable, this means taxpayers may get money back, even if they have no tax withheld. However, to get the credit, taxpayers need to file a tax return and specifically claim the EITC, even if they don’t have a filing requirement.
Recent changes to the EITC make the credit available to more taxpayers than in years past. Eligibility for the EITC varies based on income and family size. Households with three or more qualifying children will receive a 2012 tax credit of $5,891 if their Adjusted Gross Income (AGI) is less than $45,060 when filing individually or $50,270 when married filing jointly. The equivalent credit for tax year 2011 was $5,751 for individuals with an annual AGI less than $43,998 or $49,078 when married filing jointly.
On the other end of the EITC spectrum, for tax year 2012, households with no qualifying children will receive a $475 tax credit if their AGI is less than $13,980 when filing individually or $19,190 when filing married filing jointly. Similar middle tier credit adjustments are available for taxpayers claiming one or two qualifying children.
Eligibility for the EITC is very fact specific as to eligibility requirements and prone to errors. Even if someone else prepares your tax return, a taxpayer is still responsible for the accuracy their own tax return. Taxpayers should seek tax advice if they are not sure whether they qualify for the EITC. Common EITC errors identified on the IRS website include:
- Claiming a child who is not a qualifying child.
- Filing as single or head of household when actually married.
- Reporting incorrect income or expense amounts.
- Missing or incorrect Social Security numbers for self, spouse or qualifying children.
While claiming the EITC will get you immediate tax relief, avoiding these common tax errors will give you stress relief.