One of the most claimed, but least understood and publicized is the Earned Income Credit (EIC) for low income earners. Thanks to Obama’s Economic Stimulus Package this credit has received a considerable bump for tax years 2009 and 2010 and many families may now qualify for this credit. The EIC is basically a tax credit for certain people who earn and income (hence the name of the credit) and have less than $48,279 of earned income. Because it is a tax credit it is money straight in your pocket (refund) or reduces the amount of tax you owe. The table below provides a summary of the qualification criteria for the credit:
As shown in the table, the amount of EITC and income thresholds increase in 2009 and 2010 for workers with a third qualifying child. Also, the definition of qualifying child has also changed in 2009, which is now:
· To be your qualifying child, a child must be younger than you unless the child is permanently and totally disabled.
· A child cannot be your qualifying child if he or she files a joint return, unless the return was filed only as a claim for refund.
· If the parents of a child can claim the child as a qualifying child but no parent so claims the child, no one else can claim the child as a qualifying child unless that person’s adjusted gross income (AGI) is higher than the highest AGI of any of the child’s parents who can claim the child.
Example of claiming the EIC: Your AGI is $35,550, you are single, and you have one qualifying child. You cannot claim the EIC because your AGI is not less than $35,463. However, if your filing status was married filing jointly, you might be able to claim the EIC because your AGI is less than $40,463.
Additional Criteria and Claiming the Earned Income Credit in your Tax Return
If you are eligible for the EIC based on the above criteria, you normally claim in your tax return. To claim the EIC credit you (and your spouse if filing a joint return) must also have a valid SSN issued by the Social Security Administration (SSA). Any qualifying child listed on Schedule EIC also must have a valid SSN. You can request an extension if you do not have your SSN. Other criteria you must meet to claim the EITC :
- Your investment income is $3,100 or less. If your investment income is more than $3,100, you cannot claim the credit.
- You Must Be a U.S. Citizen or Resident Alien All Year
- You must however have earned income through working during the year (hence the name of the credit). If you are married and file a joint return, you meet this rule if at least one spouse works and has earned income. If you are an employee, earned income includes all the taxable income you get from your employer. If you are self-employed or a statutory employee, you will figure your earned income on EIC Worksheet B in the instructions for Form 1040
- If you retired on disability, taxable benefits you receive under your employer’s disability retirement plan are considered earned income until you reach minimum retirement age
- If you and someone else have the same qualifying child but the other person cannot claim the EIC because he or she is not eligible or his or her earned income or AGI is too high, you may be able to treat the child as a qualifying child. But you cannot treat the child as a qualifying child to claim the EIC if the other person uses the child to claim any of the other six tax benefits listed earlier.
If you expect to qualify for the earned income credit in 2010, you may be able to receive part of it in each paycheck throughout the year from your employer (the maximum Advance EITC workers can receive from their employers is $1,830). For more information on the above, you can refer to the IRS Publication 596
Related:
~ 2009 vs. 2010 Federal Income Tax Brackets
~ 2009 Federal Income Tax Guide
~ How to Get a Free Copy of your IRS Tax Return
~ Stimulus Payments in 2010 & 2011
More Related posts:
- 2009 Federal Income Tax Guide Features All The Stimulus Recovery Tax Break Details; Which Can Help People Save When Filing Returns in 2010
- The End of the 2009 Cash for Clunkers Used for New Tax Free CARs Subsidy – Qualification and Eligibility Criteria
- 2009 Tax Return Forms and IRS Schedules for Claiming Stimulus Tax Breaks Like the Home Buyer Credit, New Car Deduction and Energy Efficiency Credits
- New Car (up to $49,500) Sales Tax Deduction in 2009 Obama Economic Stimulus Package. Will it be Extended into 2010?
- No Second Stimulus Check in 2009 or 2010. $800/$400 Making Work Pay and $250 Social Security Tax Credits Instead. Eligibility and Missing Payments
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