The Earned Income Tax Credit (EITC) is a financial boost for people working hard to make ends meet. Millions of workers may qualify for the first time this year due to changes in their marital, parental or financial status.
The earned income tax credit subsidizes low-income working families. The credit equals a fixed percentage of earnings from the first dollar of earnings until the credit reaches its maximum; both the percentage and the maximum credit depend on the number of children in the family. The credit then stays flat at that maximum as earnings continue to rise, but eventually earnings reach a phase-out range. From that point, the credit falls with each additional dollar of income until it disappears entirely. The phase-out begins at a higher income for married couples than for single parents. The credit is fully refundable: any excess beyond a family’s income tax liability is paid as a tax refund.
Generally, the EITC has no effect on welfare benefits. In most cases, EITC payments are not used to determine eligibility for Medicaid, Supplemental Security Income (SSI), Supplemental Nutrition Assistance Program (food stamps), low-income housing or most Temporary Assistance for Needy Families (TANF) payments. Though unemployment benefits are not earned income, they are taxable income and may affect the amount of EITC.
An Example for Tax Year 2013
The EITC varies based on income and family size. The table showing credit amounts can be found in the Instruction booklets for Forms 1040, 1040A and 1040EZ and in Publication 596, Earned Income Credit. This includes the expanded benefit for families with three or more children.
Those who qualify for EITC for tax year 2013, can get a credit from:
- $2 to $487 with no qualifying children;
- $9 to $3,250 with one qualifying child;
- $10 to $5,372 with two qualifying children;
- $11 to $6,044 with three or more qualifying children.
As the list shows, not everyone qualifies for the maximum credit. In 2013, the average credit was $2,300.
Even though most federal tax refunds are issued in less than 21 days, many factors can affect how long it may take for taxpayers to get their refunds who file for EITC. It is also possible that a tax return could require additional review and therefore take longer to process.
Eligibility for EITC
Besides filing a tax return, people must meet various requirements. Some of these requirements apply to everyone. Then, there are additional requirements that apply to those who have one or more children, and another set of requirements that apply to people who do not have a qualifying child.
If you have any questions, please feel free to contact JV LAW GROUP. Call us today at (714) 752-3270. We are here to help!
