24 JanTax Tips On Earned Income Tax Credit

Via a press release from Jackson Hewitt

Taxpayers should review their eligibility for the earned income tax credit (EITC), a refundable federal income tax credit of up to $5,891 for working families and individuals.

The maximum EITC amount for this year’s tax return represents a $140 increase over last year’s maximum. The credit allows taxpayers to claim a refund of any credit remaining, provided that any tax liability is paid.

“The earned income tax credit is one of the most significant and most commonly overlooked credits each year, but it is also a complex one,” said Mark Steber, chief tax officer of Jackson Hewitt Tax Service Inc. “Not enough taxpayers claim the earned income tax credit, and one of the reasons is that the provisions, eligibility requirements and tax forms can make it difficult for the average taxpayer to understand without help from a trained tax preparer.”

To claim the EITC, taxpayers must first determine if they are eligible. Taxpayers must have a Social Security Number, income from work and have total earned income and adjusted gross income less than the following amounts:

$45,060 ($50,270 married filing jointly) with three or more qualifying children
$41,952 ($47,162 married filing jointly) with two qualifying children
$36,920 ($42,130 married filing jointly) with one qualifying child
$13,980 ($19,190 married filing jointly) with no qualifying children

Even non-traditional households such as those where a child lives with their grandparents, aunts, uncles or older siblings may qualify for this credit, but the same child cannot be claimed by more than one taxpayer for EITC purposes.

Additional complexities to determine a taxpayer’s eligibility should be reviewed with a trained tax professional to verify an individual’s EITC eligibility. For example, the location of the taxpayer’s residence, the age of the taxpayer, spouse and children and the marital status of the taxpayer can all impact eligibility for the EITC.

Once eligibility is confirmed, taxpayers should be aware of the credit amount that can be claimed. The maximum credit amount varies based on the taxpayer’s number of qualifying children. For the 2012 tax year, the maximum amounts are:

$5,891 with three or more qualifying children
$5,236 with two qualifying children
$3,169 with one qualifying child
$475 with no qualifying children (a taxpayer with no qualifying children may claim the credit if he or she is between 25 and 64 years of age by the end of the tax year and has been a resident of the U.S. for more than half of the tax year)

There are additional qualifications apply for EITC with children.

Many taxpayers that qualify for the EITC also qualify for the Additional Child Tax Credit. This credit is a refundable credit of any unused child tax credit of up to $1,000 per eligible child under the age of 17.

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