The Earned Income Tax Credit has helped workers with low and moderate incomes get a tax break for 40 years. Yet, one out of every five eligible workers fails to claim it. Here are some things you should know about this valuable credit:
- Review Your Eligibility. If you worked and earned under $53,267, you may qualify for EITC. If your income or family situation has changed, you should review the EITC eligibility rules. You might qualify for EITC this year even if you didn’t in the past. If you qualify for EITC you must file a federal income tax return and claim the credit to get it. This is true even if you are not otherwise required to file a tax return. Don’t guess about your EITC eligibility. Use the EITC Assistant tool on IRS.gov. The tool can help you find out if you qualify for the credit. It can also estimate the amount of your EITC.
- Know the Rules. You need to understand the rules before you claim the EITC, to be sure you qualify. It’s important that you get this right. Here are some factors you should consider:
- If you are married and file a separate return you do not qualify for EITC.
- You must have a Social Security number that is valid for employment for yourself, your spouse, if married, and any qualifying child listed on your tax return.
- You must have earned income. Earned income includes earnings from working for someone else or working for yourself.
- You may be married or single, with or without children to qualify. If you don’t have children, you must also meet age, residency and dependency rules. If you have a child who lived with you for more than six months of 2015, the child must meet age, residency, relationship and the joint return rules to qualify.
- If you are a member of the U.S. Armed Forces serving in a combat zone, special rules apply.
- Lower Your Tax or Get a Refund. If you qualify for EITC, you could pay less federal tax, no tax or even get a refund. EITC could be worth up to $6,242. The average credit was $2,447 last year.
For more on EITC, see IRS Publication 596, Earned Income Credit. It’s available in English and Spanish on IRS.gov or for more help in person, give us a call here at Northeast Financial Strategies Inc.