The earned income tax credit (EITC), can benefit workers who do not make much money or those who did but lost their jobs. This tax credit allows qualified individuals to receive back a portion of the taxes that they paid.
Furthermore, it can produce a tax refund for eligible tax filers who had no tax liability in the first place. Most tax credits are going to be non-refundable which means that they will bring your tax bill down to zero. However, the EIC is a refundable tax credit which means after your bill is brought to zero you will get the remaining money back in the form of a tax refund.
There is a con to this credit though. It can be complicated because eligible taxpayers are not going to have the money to get professional help when it comes to filing their taxes. So, the IRS has started an online program, “The Earned Income Tax Credit Assistant”, to aid low income tax filers.
All you have to do is answer some questions and the earned income credit calculator aids you in selecting a filing status and will provide you an estimate of the amount of the credit that you could receive.
Now that we have gotten that out of the way we will look at the EITC’s guidelines and pitfalls.
Who Qualifies for the EITC?
A lot of tax payers think that the EITC is only available to parents yet this is not true. The amount that the IRS is going to give back to eligible low income tax payers with children is more than single filers but it is also adjusted for inflation each year.
2012 Tax Maximum Credit
- $5,891 with three or more qualifying children
- $5,236 with two qualifying children
- $3,169 with one qualifying child
- $375 with no qualifying children
To qualify for the credit you are going to have to earn some money just not too much.
2012 ETIC Adjusted Gross Income Limits
- $45,060 ($50,270 if married filing jointly) for three of more qualifying children
- $41,952 ($47,162 if married filing jointly) for two qualifying children
- $36,920 ($42,130 if married filing jointly) with one qualifying child
- $13,980 ($19,190 if married filing jointly) with no qualifying children.
All income counts towards the eligibility limits. Investment income is included as well. If you have too much unearned income you may be disqualified. Additionally, if you are married filing separately you are not eligible for the EITC. However, if you are married but you and your spouse have been separated for six months you may qualify under the head of household status.
How Turbo Tax Can Help
Turbo Tax 2014 helps by asking easy to answer questions in interview format while filling out your tax forms. The answers you give allow them to know whether or not you qualify for certain deductions and credits, such as the EITC. If you need help answering a question they have experts available to assist you.
They insure you get the largest refund possible and even have a free tax refund calculator available so you can know how much of a refund to expect.