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Ten Things You May Not Know About the Earned Income Tax Credit
Published by the IRS
The Earned Income Tax Credit is for people who work, but have lower incomes. Here are some things you may not know about the EITC.
1. A quarter of all taxpayers that qualify don’t claim the credit. The Earned Income Tax Credit is money you can use to make a difference in your life. Just because you didn’t qualify last year, doesn’t mean you won’t this year. As your financial situation changes from year-to-year you should review the EITC eligibility rules to determine if you qualify.
2. If you qualify, it could be worth up to $4,800 this year. If you qualify, you could pay less federal tax or even get a refund. The EITC is based on the amount of your earned income and whether or not there are qualifying children in your household.
3. Your filing status cannot be Married Filing Separately. Your filing status must be married filing jointly, head of household, qualifying widow or single.
4. You must have a valid Social Security Number. You, your spouse (if filing a joint return) and any qualifying child listed on Schedule EIC must have a valid SSN issued by the Social Security Administration.
5. You must have earned income. This credit is called the “earned income” tax credit because you must work and have earned income to qualify. You have earned income if you work for someone who pays you wages or you are self-employed.
6. Married couples and single people without kids may qualify. If you do not have qualifying children, you must also meet the age and residency requirements as well as dependency rules.
7. Special rules apply to members of the U.S. Armed Forces in combat zones. Members of the military can elect to include their nontaxable combat pay in earned income for the EITC. If you make the election, the combat pay remains nontaxable, but you must include in earned income all nontaxable combat pay you received.
8. You can visit the IRS Web site to estimate your credit online. It’s easy to determine whether you qualify for the EITC. The EITC Assistant, an interactive tool available on IRS.gov, removes the guesswork from eligibility rules. Just answer a few simple questions to find out if you qualify and to estimate the amount of your EITC. You will see the results of your responses right away.
9. E-file programs will figure the credit for you. If you are preparing your taxes electronically, the software program you use will figure the credit for you. If you qualify for the credit you may also be eligible for Free File. You can access Free File through the IRS Web site at IRS.gov.
10. Advanced Earned Income Tax Credit. You don’t have to wait until you file your tax return to receive your EITC. Advance EITC is a portion of the EITC that qualified workers may be able to receive in advance payments, added to their wages throughout the year. For more information, see Form W-5, Earned Income Credit Advance Payment Certificate.
For more information about the EITC and Advance EITC see IRS Publication 596, Earned Income Credit. This publication (available in both English and Spanish) and Form W-5 can be downloaded from IRS.gov or ordered by calling 800-TAX-FORM (800-829-3676).
Links:
EITC Assistant
Earned Income Tax Credit
Publication 596, Earned Income Credit (EIC) (PDF 373K)
Free File
Tax Topic 601, Earned Income Credit
AARP Tax-Aide
EITC Assistant
Earned Income Tax Credit
Publication 596, Earned Income Credit (EIC) (PDF 373K)
Free File
Tax Topic 601, Earned Income Credit
AARP Tax-Aide
Five Things To Know Before You File Your Tax Return
Published by the IRS
Here are a few tax law changes you may want to note before filing your 2008 federal tax return:
1. Expiring Tax Breaks Renewed The following popular tax breaks were renewed for tax-years 2008 and 2009:
Deduction for state and local sales taxes on Form 1040 Schedule A, Line 5
Educator expense deduction on Form 1040, Line 23 or Form 1040A, Line 16
Tuition and fees deduction on Form 8917
In addition, the residential energy-efficient property credit is extended through 2016. In general, solar electric, solar water heating and fuel cell property qualify for this credit. Starting in 2008, small wind energy and geothermal heat pump property also qualify.
Deduction for state and local sales taxes on Form 1040 Schedule A, Line 5
Educator expense deduction on Form 1040, Line 23 or Form 1040A, Line 16
Tuition and fees deduction on Form 8917
In addition, the residential energy-efficient property credit is extended through 2016. In general, solar electric, solar water heating and fuel cell property qualify for this credit. Starting in 2008, small wind energy and geothermal heat pump property also qualify.
2. Standard Deduction Increased for Most Taxpayers The 2008 basic standard deductions all increased. They are:
$10,900 for married couples filing a joint return and qualifying widows and widowers
$5,450 for singles and married individuals filing separate returns
$8,000 for heads of household
Beginning this year, taxpayers can claim an additional standard deduction based on the state or local real-estate taxes paid in 2008. Also new for 2008, a taxpayer can increase his standard deduction by the net disaster losses suffered from a federally declared disaster.
$5,450 for singles and married individuals filing separate returns
$8,000 for heads of household
Beginning this year, taxpayers can claim an additional standard deduction based on the state or local real-estate taxes paid in 2008. Also new for 2008, a taxpayer can increase his standard deduction by the net disaster losses suffered from a federally declared disaster.
3. Contribution Limits Rise for IRAs and Other Retirement Plans This filing season, more people can make tax-deductible contributions to a traditional IRA. The deduction is phased out for singles and heads of household who are covered by a workplace retirement plan and have modified adjusted gross incomes between $53,000 and $63,000. For married couples filing jointly, the income phase-out range is $85,000 to $105,000.
4. Standard Mileage Rates Adjusted for 2008 The standard mileage rates for business use of a vehicle:
50.5 cents per mile from Jan. 1 to June 30, 2008
58.5 cents per mile driven during the rest of 2008
The standard mileage rates for the cost of operating a vehicle for medical reasons or a deductible move:
19 cents per mile Jan. 1 to June 30, 2008
27 cents from July 1 to Dec. 31, 2008
58.5 cents per mile driven during the rest of 2008
The standard mileage rates for the cost of operating a vehicle for medical reasons or a deductible move:
19 cents per mile Jan. 1 to June 30, 2008
27 cents from July 1 to Dec. 31, 2008
The standard mileage rate for using a car to provide services to charitable organizations remains at 14 cents a mile. Special rates apply to the Midwest disaster area.
5. Kiddie Tax Revised The tax on a child’s investment income previously only applied to children younger than age 18. It now applies if the child has investment income greater than $1,800 and is:
Younger than 18
18 years of age and had earned income that was equal to or less than half of his or her total support in 2008
Older than 18 and younger than 24, a student and during 2008 had earned income that was equal to or less than half of his or her total support.
Links:
IRS FS 2009-1 Highlights of 2008 Tax Law Changes
Form 1040 instructions (PDF 941K)
Publication 526 Charitable Contributions
IRS FS 2009-1 Highlights of 2008 Tax Law Changes
Form 1040 instructions (PDF 941K)
Publication 526 Charitable Contributions
Stacie's Tax Stuff 