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Be sure to claim the EITC if you qualify

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National EITC Awareness Day was Jan. 25. Did you miss it? Probably.

It's not a federal holiday, but rather the day each year when the Internal Revenue Service celebrates the tax benefits the Earned Income Tax Credit, the full name of the aforementioned acronym.

It's also a time that the IRS tries to get the word out about the EITC.

This year, though, the IRS' message about this tax break for lower-income workers got drowned out. EITC Day 2019 fell on the day that the longest government shutdown in U.S. history came to an end. So most attention, tax and otherwise, was focused on that

But in this tax case, better late than never definitely applies. So today on the ol' blog, we're celebrating a belated National EITC Awareness Day.

EITC's history of helping: The EITC first appeared in the tax code in 1975 as part of that year's Tax Reduction Act. It was a logical extension of the 1960s-era War on Poverty, creating a way for lower-paid workers to offset the Social Security taxes that take a relatively big bite out of their smaller paychecks.

Nationwide last year, 25 million eligible workers and families received about $63 billion thanks to their EITC claims. The average amount of this tax credit received across the country in 2018 was almost $2,500.

But the IRS says that every year millions of eligible taxpayers overlook this potentially valuable tax break.

For the 2018 tax year, whose returns we now are submitting during the just-opened filing season, the EITC could provide eligible families with three or more qualifying children a credit of up to $6,431.

Even filers without kids could get some added money. The EITC for these folks could be as much as $519.

EITC pluses and pitfalls: Since it's a tax credit, the EITC reduces a taxpayer's IRS bill dollar for dollar.

Plus, it's refundable, meaning an eligible individual who doesn't owe any or a lot of tax could get the EITC back as a refund.

However, the EITC does pose some problems. It also comes under fire from a lot of fire from lots of folks, many of them on Capitol Hill.

The tax break is complicated, meaning that low-income individuals who can afford paid tax help are prone to make mistakes in claiming it.

Others, both taxpayers and unscrupulous tax professionals, are simply crooks. They devise ways to get the EITC or get more than they should. Some use the EITC as part of scams to fraudulently claim the credit in the name of unsuspecting victims and then take a big cut of the illegally claim credit amount.

To help the IRS get a better handle on these claims, the agency by law must hold EITC-related refunds until mid-February. This delay was added as part of the Protecting Americans from Tax Hikes, or PATH, Act as a way, in part, to help stop tax identity theft and review EITC (and additional child tax credit) claims to ensure they are legitimate and correct.

Overlooked or ignored by millions: EITC-associated refund delays, as well as the complexity of the tax break, are among reasons why millions of credit-eligible workers every year miss out on the tax break.

The IRS has been working for more than a decade to change that.

"The Earned Income Tax Credit makes a big difference for working families across the country,” said IRS Commissioner Chuck Rettig in announcing this year's EITC Awareness Day back on the 25th. "We encourage people to carefully review the EITC instructions to see if they qualify for this important credit when they prepare their taxes."

Who qualifies and for how much: The key word in this tax break's name is earned.

You must make money from work to qualify for the EITC. But make too much and you're ineligible.

The IRS recommends that folks who earned around $54,000 or less use the agency's online EITC Assistant to find out if they qualify.

This online tool not only helps you determine whether you qualify, but also estimates the amount of the credit you could get.

For 2018 claims made this filing season, both your earned income and adjusted gross income (AGI) must be no more than the amounts, by filing status, below:



Filing Status

Qualifying Children Claimed

0

1

2

3 or More

Single,
Head of Household or Surviving Spouse

$15,270

$40,320

$45,802

$49,194

Married
Filing Jointly

$20,950

$46,010

$51,492

$54,884

 

If you qualify, the maximum EITC amount you might receive for the 2018 tax year are:

  • $6,431 with three or more qualifying children
  • $5,716 with two qualifying children
  • $3,461 with one qualifying child
  • $519 with no qualifying children

The online EITC Assistant will give you specifics for your tax situation. And if in using it you find that you aren't eligible, the online tool explains why.

Other EITC help options: If you want more personal assistance, look for a Volunteer Income Tax Assistance (VITA) or Tax Counselling for the Elderly (TCE) program near you.

The tax help operations are staffed by IRS-trained volunteers to help lower-income and elderly taxpayers prepare and file their taxes for free or low fees.

There are more than 12,000 VITA and TCE locations nationwide. Most are open from early February to mid-April. Some sites offer help on a first-come-first-served basis, while others require an appointment.

To find VITA and TCE locations in your area, visit the IRS' online Free Tax Return Preparation Web page or call toll-free (800) 906-9887.

Also look into Free File, the IRS-tax software manufacturers partnership that offers eligible taxpayers a no-cost way to electronically prepare and e-file their returns. The available providers' programs can help EITC taxpayers complete the credit worksheets and forms.

Yes, claiming the EITC does take more work. And it means you might not get your refund as soon as you'd like.

But not claiming the EITC means you might be leaving hundreds or possibly thousands of dollars on the tax table. When we're talking those amounts of money, a bit of hassle is worth it.

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