The Internal Revenue Service (IRS) announced on Friday the expanded Earned Income Tax Credit (EITC), a larger credit for larger families that offers greater relief for people who struggled through difficult financial times last year.
EITC is one of the federal government’s largest benefit programs and is now in its thirty-fifth year. Last year, almost 24 million people received $50 billion in benefits, and the average credit was more than $2000.
“As part of the economic recovery efforts, there have been important changes to expand EITC to benefit taxpayers,” said IRS Commissioner Doug Shulman. “Today, more than ever, hard-working individuals and families can use a little extra help. EITC can make the lives of working people a little easier.”
Eligibility for EITC depends on earned income and family size, among other tests. However, single people and childless workers also are eligible, although for smaller amounts. For tax years 2009 and 2010, the American Recovery and Reinvestment Act created a new category for families with three or more children and expanded the maximum benefit for this category.
To qualify for the EITC in tax year 2009, earned income and adjusted gross income (AGI) for individuals must each be less than:
- $43,279 ($48,279 married filing jointly) with three or more qualifying children
- $40,295 ($45,295 married filing jointly) with two qualifying children
- $35,463 ($40,463 married filing jointly) with one qualifying child
- $13,440 ($18,440 married filing jointly) with no qualifying children
The maximum credit for tax year 2009 is:
- $5,657 with three or more qualifying children
- $5,028 with two qualifying children
- $3,043 with one qualifying child
- $457 with no qualifying children
To qualify for the EITC, investment income cannot exceed $3,100 for tax year 2009. For families, there are also certain requirements for child residency and relationship that must be met.
Another new provision adds to the definition of a “qualifying child:” The child must be younger than the person claiming the child unless the child is totally and permanently disabled any time during the year. The child cannot have filed a joint return other than to claim a refund.
Also new for 2009, if a qualifying child can be claimed by either a parent or another person, the other person must have an AGI higher than the parent in order to claim the child for EITC purposes.
The IRS says that historically, one in four eligible taxpayers fails to claim the EITC, which is why the IRS and its free tax preparation partners host an annual EITC Awareness Day. This year, there are 68 news conferences being held around the country. Community coalitions and IRS partners nationwide also are also issuing 128 news releases, writing letters to the editor and using social media tools to spread the word about EITC.
Typically, people who fail to claim the EITC include workers without qualifying children, people whose earned income falls below the threshold required to file a tax return, farmers, rural residents, people with disabilities and nontraditional families such as grandparents raising grandchildren. People must file a tax return to claim the EITC, even if they don’t owe any tax.
Free help is available to EITC-eligible taxpayers. There are nearly 12,000 free tax preparation sites nationwide. People who want to prepare their own tax returns can visit Free File on IRS.gov. This free tax software and free electronic filing program will walk taxpayers through a question and answer format and help them claim the tax credits and deductions for which they are eligible.
EITC-eligible taxpayers also can seek assistance at the 400 IRS Taxpayer Assistance Centers nationwide. To assist EITC taxpayers, 167 IRS assistance centers will offer Saturday service on February 6 and February 20.
More than 65% of EITC returns are prepared by a third party. The IRS encourages taxpayers to choose a reputable tax preparer to avoid problems that come with an inaccurate tax return, and urges tax preparers to follow due diligence requirements when preparing an EITC tax return. More information is available at irs.gov/eitc.
Source:
Internal Revenue Service
