The Earned Income Tax Credit for Low Income Families and Individuals

The Earned Income Tax Credit, EITC or EIC, is a benefit for working people with low to moderate income. To qualify, you must meet certain requirements and file a tax return, even if you do not owe any tax or are not required to file. EITC reduces the amount of tax you owe and may give you a refund.

In partnership with the Temporary Assistance for Needy Families (TANF) and the Internal Revenue Service (IRS), OCSE encourages eligible taxpayers to file for the Earned Income Tax Credit (EITC).

Despite the success of the program, research reveals that perhaps 25% of eligible tax filers do not claim it.

How does EITC help families?

  • Nationwide, last year, about 27 million taxpayers received more than $65 billion in EITC.
  • EITC has been instrumental in closing the poverty gap for many of the nation’s working families.
  • Children whose families receive refundable tax credits are more likely to attend college and have higher earnings.
  • EITC refunds have been linked to improved infant well-being and health.
  • Children in households that receive the EITC appear healthier, and less likely to develop early disabilities and illnesses linked to child poverty, which may also increase their earning capacity as adults.

What is EITC?

  • EITC is a federal tax refund to increase the income of working families by providing tax reductions and cash supplements.
  • As a federally funded anti-poverty initiative, the primary purpose of EITC is to help people employed at low-wages achieve greater financial stability by offsetting taxes, supplementing wages, and making work more more gainful.
  • Refunds received from EITC are not considered income for any federal or federally funded public benefit program, such as:
    • Medicaid
    • Supplemental Security Income
    • Supplemental Nutrition Assistance Program (food stamps)
    • Low-income housing
    • Most cash assistance payments received through state TANF programs

How do I claim EITC?

  • Tax filers can file and claim the EITC for free:
    • The Volunteer Income Tax Assistance offers free tax return preparation service through more than 13,000 community sites for people earning $54,000 a year or less.
    • The IRS offers brand name software products through the Free File . The IRS works with national partners, community-based coalitions and thousands of local partners and governments. These partnerships provide free EITC tax return preparation, tax help, and tax education.
  • Individuals can check their tax year eligibility by answering questions and providing basic income information using the IRS EITC Assistant that is available in Englishvisit disclaimer page and en Españolvisit disclaimer page. The tools determine filing status, the number of qualifying children a parent may have, and then estimate the amount of EITC filers could expect. They can also print out a summary of their results.

Tax Year 2016 qualification levels:

  • Earned Income and adjusted gross income must each be less than:
    • $47,955 ($53,505 married filing jointly) with three or more qualifying children
    • $44,648 ($50,198 married filing jointly) with two qualifying children
    • $39,296 ($44,846 married filing jointly) with one qualifying child
    • $14,880 ($20,430 married filing jointly) with no qualifying children
  • Tax Year 2016 maximum credit:
    • $6,269 with three or more qualifying children
    • $5,572 with two qualifying children
    • $3,373 with one qualifying child
    • $506 with no qualifying children

When Can I Expect My Refund?

If you claim the earned income tax credit (EITC) or the additional child tax credit (ACTC) on your tax return, by law the IRS, can’t issue your refund before mid-February.

Gather the Following Documents Before You Work on Your Tax Return

If you have someone prepare your tax return, bring the documents to your preparer to make sure your tax return is prepared correctly.

  • Social Security cards, a Social Security number verification letter, or other U.S. government document verification for all persons you may list on the return.
  • Birth dates for all persons you may list on return.
  • Copies of last year’s federal and state returns, if you have them.
  • All income statements: Forms W-2 and 1099, Social Security, unemployment and other statements, such as pensions, stocks, interest and any documents showing taxes withheld. If you own or run a business or farm, collect records of all your income.
  • All records of expenses, such as tuition, mortgage interest, or real estate taxes. If you own or run a business or farm, collect records of all your expenses.
  • All information reporting forms such as the 1095-A, 1095-B or 1095-C.
  • Bank routing numbers and account numbers to direct deposit any refund.
  • Dependent child care information: name and address of paid caretakers and either their Social Security number or other tax identification number.

Common EITC errors

  • Claiming a child who does not meet all the qualifying child tests: relationship, residency age and joint return.
  • More than one person claiming the same child.
  • Social Security or last name mismatches.
  • Filing as single or head of household when married.
  • Over- or under-reporting of income or expenses.

Aminu Law Firm does not file taxes or prepare taxes. Check www.irs.gov for more information.

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