What was originally enacted in 1975, the Earned Income Tax Credit has been one of the principal antipoverty programs in the federal budget. It is also one of the most costly credits if not prepared correctly.
The Earned Income Tax Credit (EITC or EIC), unlike most tax credits for individuals, is a refundable credit. That means if the amount of the credit exceeds your tax liability, or amount of taxes you were required to pay, you will be refunded the excess of the credit.
Here’s how the credit works:
- EITC is for workers whose income does not exceed the following for 2014:
- Filing Single, no qualifying children - $14,590 ($20,020 married filing jointly)
- Filing Single, one qualified child - $38,511($43,941 married filing jointly)
- Filing Single, two qualifying children - $43,756 ($49,186 married filing jointly)
- Filing Single, three or more qualifying children - $46,997 ($52,427 married filing jointly)
- Investment income must be $3,350 or less for 2014
- The credit awarded, based on your income level and filing status is between $2 - $6,143
Given the benefits, it’s surprising to find out that taxpayers are not even aware of the credit, or are penalized because the credit is used incorrectly.
The IRS is hoping to change that today, though. The IRS has teamed up with national and local news outlets to hold a one-day awareness campaign as we begin tax season. The goal is to increase the use of the credit, as well as reduce the amount of errors that occur using the credit.
If you have questions about whether you qualify for the credit, you can visit the IRS.gov website for more information.
Looking for a tax preparation software that can help with the EITC? eSmart Tax allows users to claim the credit if they qualify, and it’s free to start your return. If you found this article helpful, Like us on Facebook or follow us on Twitter, and get more information like this posted directly to your timeline or newsfeed! You can also use the buttons below to spread the stress-relieving help all around.