Filed Tax Return Forgot Earned Income Credit EIC

Tax returns can be amended to claim the EIC and CTC for up to three previous years. If you forget to claim the earned income tax credit (EITC) in one year. You can file past tax returns to claim the earned income credit. There are very specific steps to follow in order to claim the EITC for back tax year.

 

EITC and Form 1040X

Obtain IRS Form 1040X, “Amended U.S. Individual Income Tax Return,” and the 1040X Instructions. If the taxpayer is raising a qualifying child, also obtain the Schedule EIC for the tax year in which the EIC was not claimed and Schedule 8812 for the year in which the CTC is to be claimed. Prior-year tax forms and instructions are available free from the IRS by calling 1-800-TAX-FORM. Forms for prior years and the current year are on the IRS website at: www.irs.gov/formspubs.

 

Completing Form 1040X

Form 1040X is used to show any change the taxpayer wants to make to a previous tax return. Completing this form is not difficult, but some taxpayers may need assistance understanding the instructions. Call the IRS at 1-800-829-1040 for assistance or to find the location of a nearby IRS office with a walk-in service center.

 

Calculating Earned Income Credit in Previous Years

Calculate the EIC amount using the taxpayer’s tax return and IRS instructions for the year in question. Put this EIC amount on the Earned Income Credit line of Form 1040X. Complete the Schedule EIC if a qualifying child is claimed. Follow the instructions for Form 1040X to complete the form. To figure the CTC refund, use the taxpayer’s tax return and the IRS instructions and worksheets for the CTC and Additional Child Tax Credit. Complete Schedule 8812 and put the amount from line 13 on the Additional Child Tax Credit line of Form 1040X. Follow the instructions for Form 1040X to complete the form.

 

Submitting Form 1040X for Earned Income Tax Credit

To file the amended return, attach the completed Schedule EIC and/or Schedule 8812 if claiming a child. Mail the amended return to the IRS Service Center listed in the 1040X Instructions.

Generally, Form 1040X can be filed within three years of the date the tax return was previously filed. There is no charge or penalty for filing an amended return. A recently-filed tax return should not be amended with Form 1040X until after it has been processed by the IRS — about six weeks for a return that was originally sent by mail and two weeks for a return sent electronically.

 

What if the taxpayer no longer has a copy of the previous tax return?

Obtain IRS Form 4506-T, “Request for Transcript of Tax Return.” There is no charge for a transcript. (A photocopy of the actual tax return will cost $50, and is requested with Form 4506, “Request for Copy of Tax Return,” but a photocopy is not required to amend a return.) The request for a transcript should not be made until six weeks after the initial tax return was filed. It should take about 10 work days to receive the transcript from the IRS. The tax return transcript contains the information necessary to complete Form 1040X. It can be requested for returns filed in the current calendar year and two preceding calendar years.

Form W-5 Earned Income Credit

Would you like to help your employees to increase net income at no cost to you? You can do this by giving employees who meet the requirements of the earned income credit with the pay and subtracting those payments you make of payroll taxes.

 

Form W-5 Earned Income Tax Advance

This is possible through the Advance Payment Program Earned Income Credit (or EIC Advance) which is filed for through IRS Form W-5. This form changes each year. The 2015 Form W-5 can be found on the IRS website and allows you to claim an earned income credit advance. The advance EITC allows certain taxpayers to receive their EITC in installments throughout the year, instead of a lump sum during the following filing season. Those who expect to qualify for advance EITC can register in January. The credit will appear in each paycheck, equally dispersed throughout the year.

Form W-5 (for Advance Earned Income Credit) is discontinued as of December 31, 2010.  Individuals can still claim the Earned Income Credit on their personal income tax returns but the Advance Earned Income Credit is no longer an option as a payroll tax credit after December 31, 2010.

 

What is the Earned Income Credit Advance?

The earned income credit is a refundable credit for certain skilled workers. The goal is to help offset some of the increases in the cost of living and social security taxes. The credit reduces the amount of tax due, if any, and may result in a refund to the taxpayer. Employees who qualify may receive part of their earned income credit in their paychecks throughout the year, rather than waiting to file the tax return.

To be eligible for this payment of EIC advance, the employee must have to expect to have a qualifying child, expect the income is between certain limits and have to wait to other specified requirements, which are explained W-5 form, Advance Payment Certificate of Earned Income Credit, and in more detail in Publication 596 (SP), Earned Income Credit.

 

Getting Earned Income Tax Credit Early

Here’s how it works: An employee who is eligible and wishes to receive credit with your pay must give you a Form W-5 completed and signed. By law, you must provide advance payments to most employees who qualify and submit this form. If your employee is expected to qualify for next year, he or she will have to give a new form. To calculate the amount of credit to be included in employee pay, use Tables for Percentage Method or Tables for Method of categories Wage Advance Payment of EIC, which are contained in Publication 15 ( Circular E ), Employer’s Tax Guide (Circular E, Employer Tax Guide)

 

Advancing Earned Income Credit EIC on Form W-5

The prepayment is added to the employee’s net pay for the pay period. As the EIC does not constitute salary, you do not withhold payment tax on income taxes or Social Security or Medicare .Usually you make prepayment using the tax withheld income taxes, social security and Medicare for the employee and the employer. However, the payment does not change the amount of payroll taxes you normally would retain the employee’s pay. If the employee is entitled to an advance payment that is greater than its retention, you can still make a payment to the employee.

Report payments made to employees showing the total payments on line ahead of the EIC tax on payroll: Form 941, Form 943, Form 944 or Schedule H of Form 1040, where appropriate, and subtract this amount from the total payroll taxes. Publication 15 and specific instructions on the form that this will give you more information.

 

More Earned Income Tax Credit Information and Form W-5

The IRS provides information seminars to explain the EIC Come and EIC to stakeholders. If you are interested in having an employee of the IRS talk to your staff payroll and employees about the EICCome and EIC , call 1-800-829-1040 and ask for the Taxpayer Education Coordinator for your area

 

More Information about 2015 and 2016 Earned Income Tax credit (2015 EIC)

State Earned Income Tax Credit

The federal EITC has been wildly successful, increasing workforce participation and helping 6.5 million Americans escape poverty in 2012, including 3.3 million children. Children of EITC recipients have been shown to be born healthier, perform better in school, attend college at higher rates, and earn more as adults than those children who grow up in families not receiving the EITC. Roughly half of all taxpayers with children make use of the EITC at least once during their lives, often for only a year or two at a time.

EITC is Refundable Tax Credit

Without refundability, a state EITC will not even begin to offset the most regressive taxes low-income families face. As such, refundability is by far the most important design choice confronting state policymakers. No matter how high the state EITC percentage is, if it is not refundable, it will be ineffective. Many states have refundable earned income tax credits.

 

What States have Earned Income Tax Credit?

Twenty-six states (counting the District of Columbia) have created earned income tax credits (EITCs) to help families struggling to get by on low wages make ends meet and provide basic necessities for their children. These credits build on the benefits of the federal EITC, offering a hand up to families that work.  They also are easy to administer, with nearly every dollar going directly to the working families that the credits were created to help.

 

State EITC Programs

States with EITCs report very low administrative costs — typically less than 1 percent — so nearly every dollar a state spends on the EITC goes directly to the working families in need of help. To provide its own credit, a state need only add one line to its income tax form, and the calculation is very simple. State EITCs typically are set as percentage of the federal credit. Filers simply multiply that percentage (which ranges from 3.5 percent to 40 percent, depending on the state) by the amount of their federal EITC to determine the amount of their state EITC.

 

More Information About State Earned Income Tax Credit Programs

The federal government, 26 states and the District of Columbia have credits. More than 28 million citizens received almost $66 billion in federal, refundable credits in tax year 2014. Below is a list of states that have their own earned income tax credit programs:

 

States without Earned Income Tax Credit

States without an income tax can also offer an EITC. In 2008, Washington became the first such state to pass legislation for an EITC, though it has yet to implement the credit. The tax systems of non-income-tax states take a much larger share of income from low-earning families because of their reliance on excise taxes, property taxes, and in most cases sales taxes. EITCs can help working families in these states keep more of what they earn.

 

More Information about 2015 and 2016 Earned Income Tax credit (2015 EIC)

Notice CP75 and Earned Income Tax Credit

Taxpayers will receive a Notice CP75 because the IRS is auditing your tax return. The IRS will retain your refund until they finish the tax audit related to claiming the earned income credit. You must send the information that the IRS needs before the IRS can give a refund and pay you the earned income credit.  The CP75 letter is very carefully worded about what exactly the IRS is looking for. People who do meet the tests will pass, but the letter is sent because the IRS has reason to believe you won’t.

The Internal Revenue Service (IRS) accepts most federal returns as filed. Some returns, however, are examined, or audited, to determine if income, expenses, and credits are reported accurately. Most IRS audits are not actually as bad as they sound and can typically be resolved very easily.

 

Understanding Notice CP75

This a is a very important warning from the IRS and could lead to penalties. It is extremely important that you contact the IRS no later than on the date indicated in the Notice CP75. If you need more time to gather all the information we request, please call the number on the notice to inform the IRS. It is also important that the IRS can contact you during the audit;to another address if you move or change your phone number, please let the IRS know by calling the toll-free number on the notice or by faxing to 855-235-6788 part of your response message indicating the update.

What is Notice CP 75?

Notice CP 75 tells you which parts of your tax return being audited the IRS . Other forms included tell you what to send for a refund or provide other useful information. The notice includes a lot of information and materials but the IRS can help you understand every step of what to do. You should have a copy of your tax return handy when analyzing this notice. At this point, it may be necessary to consult and tax lawyer on CPA to handle the Notice CP75.

 

Notice CP75 and Earned Income Credit

The IRS needs documentation to verify the Earned Income Credit (EIC) that you claimed. The EIC and/or the Additional Child Tax Credit (ACTC) portions of your refund are being held pending the results of this audit. If you claimed the Premium Tax Credit (PTC), that portion of your refund is also being held.

 

IRS Notice CP 75/CP 75A/CP 75B – EIC Portion of the Refund Delayed

The CP 75 series of notices are issued to inform the taxpayer that their Earned Income Credit portion of their refund is being delayed while the IRS is examining the return or determining their eligibility. The notice will state why the IRS is delaying the Earned Income Credit portion of your refund and what information or documentation you need to provide so the determination of your tax refund can be completed.

 

Notice CP75 and Earned Income Credit

The first item listed is the tax credit for earned income. Your package includes a Form 886-H-EIC (PDF) indicating all other documents that you can send to prove he can claim the EIC with your child or children who qualify. You can send any combination of these documents to get the information we need. See Schedule EIC (PDF) (Schedule EIC in pdf format) included with your tax return and follow the steps for each of the children listed:

 

 

What Information do you need to verify Earned Income Tax Credit?

  • First, you must prove that he lived with his son in the US for more than half the year:
    • If your child lived with you at the address listed on your notice, you must send a document stating that his son lived in the same direction during the tax year. For example, you could send us copies of your child’s school grades include your name and show the direction of his son. The dates of the documents have to be more than six months of the tax year.
    • If you moved to address both you and your child lived at another address, send us documents showing the same address for both of you during the tax year.
    • If your child does not attend school, you can send copies of medical records or a statement signed by the child care provider.
    • If you can not prove your child lived with you for more than half the year, then you do not qualify for the EIC .
  • Second, you must try your relationship with your child. The child must be related to you in any of the ways listed on Form 886-H-EIC. The form provides examples of what to send to test the relationship between you.
  • Third, if your child is 19 years of age or older, must show that:
    • Your child was under 24 years old and was full-time student for at least five months of the tax year (can do so by sending copies of official school records), or
    • Your child is permanently and totally disabled, sending a copy of any of the official documents listed on Form 886-H-EIC.

You can only claim the tax credit earned income if your child lived with you for more than half the year in the United States, if your child is related to you in any of the ways listed on Form 886-H -EIC and if your child had an eligible age. Your child must meet three conditions to qualify you for the loan. If you can not prove the three conditions, you may still be eligible for the credit without having a qualifying child.

 

Why was my  tax return selected for audit?

While most returns are accepted as filed, some are selected for examination. The IRS examines (or audits) some federal tax returns to determine if income, expenses, and credits are being reported accurately. The IRS selects returns for examination using various methods which include random sampling, computerized screening, and comparison of information received by the IRS such as Forms W-2 and 1099. Having your return selected for examination does not suggest that you made an error or were dishonest.

 

How does the IRS select Audits?

Another way is to use information from compliance projects that indicates a return may have incorrect amounts. These sources may include newspapers, public records, and individuals. If we determine the information is accurate and reliable, we may use it to select a return for examination.

 

Notice CP75 IRS Help

  • Call the 1-800, 1-866 or 1-888 number listed on the top right corner of your notice.
  • Authorize someone (e.g., accountant) to contact the IRS on your behalf usingForm 2848.
  • See if you qualify for help from a Low Income Taxpayer Clinic.

Updated Information for Filing 2014 EITC in 2015

For tax year 2012, 27 million taxpayers claimed $63.3 billion in EITC. We were talking about how refundable credits are a lot of money, but the bad thing is that the improper payments – bad payments going out – are 22 to 26 percent of them all. So remember, we’re talking in billions here – $13.3 billion to $15.6 billion going out in error. The IRS takes improper payments of the earned income tax credit very seriously. The IRS will continue to enforce penalties against people who improperly claim EITC benefits.

 

Improper Earned Income Credit Payments

Right now, about 60 percent of EITC returns are still prepared by paid preparers. It used to be a lot higher before. It’s going down about two percent a year with individuals preparing their own returns more now, so we’re watching that trend. We still rely on you because you do prepare the majority of those returns. Now, we recently got a new compliance study, and one of the things in that compliance study was comparing the error rate of self-prepared returns to paid preparer returns. And, unfortunately, the results indicated that the error rate was the same.

 

Form 8867

The IRS is continuing to monitor whether or not the Form 8867 is attached to the return because, remember about three years ago, it became a requirement that you not just keep it but you attach it to the return. So, this year we sent out letters. We sent out acknowledgement alerts to warn preparers as soon as we possibly could, if they didn’t know about it, that they needed to attach the Form 8867. And what we found out was most of these people were not using professional software. They were using over-thecounter software that is really for individuals, and it doesn’t have the Form 8867. So, that’s obviously a problem.

 

Filing Form 8867 for EITC

If you’re using non-professional software, you’re probably not following the e-file mandate, that if you have 10 or more returns in the 1040 series, you need to do it electronically as well. So, that’s an issue, and we’re continuing to look at it. Now, we’re asserting a $500 penalty per return if that Form 8867 is not attached, and it’s required to be attached on electronic returns, on paper returns, on amended returns, and on the returns that you give to your client that they want to file themselves. So, you need to be careful about that.

What EITC Due Diligence?

Earned Income Tax Credit – The Earned Income Tax Credit (EITC), sometimes called EIC or Earned Income Credit is a refundable tax credit. Meaning, EITC can reduce the federal tax to zero and any left-over credit is refunded. But, workers must file a tax return to get the credit even if their income is below the filing requirement. To qualify, workers must have taxable income from working for someone or from running a business or farm.

What EITC Due Diligence?

There are certain requirements that paid tax preparers need to understand before they help their clients for for the earned income credit. Paid Preparers who do not follow these due diligence requirements may be subject to penalties and fines for filing incorrect earned income credit forms for their clients.

 

Earned Income Credit EITC Due Diligence

Internal Revenue Code §6695(g) has four Due Diligence Requirements:

  1. Complete and submit Form 8867
  2. Complete and keep all worksheets used to compute the credit
  3. Apply the knowledge requirement
  4. Keep records

 

Paid Preparers filing EITC should:

  • Identify EITC due diligence requirements
  • Recall the number of EITC returns reviewed in an EITC due diligence audit
  • Calculate the amount of EITC due diligence penalty
  • Select EITC publications and online resources available to paid preparers

 

Earned Income Credit Due Diligence Penalties:

The penalties increased in 2012 and are now $500 per incidence of not meeting your due diligence requirements. Again, the fine for not meeting due diligence is $500 for each incidence. There is no maximum on number of penalties issued. There are four due diligence requirements. If you fail to meet any one of them, we can propose a penalty. So, for example, if you fail to complete the Form 8867, fail to submit the Form 8867 with each EITC return, you don’t have copies of the worksheets used, you don’t have a record of additional questions you asked or you don’t keep copies of clientprovided documents that you relied on, any one of those failures could result in a penalty. So, if we find problems on 20 returns, that’s $10,000 worth of penalties.

 

Failing to Follow EITC due diligence requirement

Depending on the facts and circumstances, the IRS may penalize either the employee or employing firm if an employee fails to comply with the EITC due diligence requirements. In some limited instances, we could fine both the employee preparer and the firm. If warranted in this situation, that would be $20,000 in penalties, and you could also be subject to other consequences, including suspension or expulsion of you or your firm from IRS efile and other disciplinary actions by the IRS Office of Professional Responsibility. And for the extreme cases, you could be barred from preparing tax returns.

 

Preventing EITC Fraud

Remember, there are four due diligence requirements. You must meet all four requirements for every return. To learn more, see our Tax Preparer Tab on EITC Central, eitc.irs.gov.

 

EITC Central

EITC Central – A website tax preparers can use to help them correctly prepare returns claiming EITC and other refundable credits, like the American Opportunity Tax Credit and the Additional Child Tax Credit. Among other things, the site includes basic EITC eligibility requirements, tax preparer toolkits, and due diligence learning modules. www.eitc.irs.gov Form 8867, Paid Preparer’s Earned Income Credit Checklist – Only paid preparers have to complete this form. The form must be submitted with the tax return of any taxpayer claiming the EITC if a preparer was paid to complete the return.

Who Must File a Tax Return for 2014

Most people have their taxes filed because it is required, but even if they do not have to legally file taxes, there are times when you should file a federal tax return. For example, you may be eligible for a tax refund and not know it.

Who Must File a Tax Return for 2014

This year there are several new rules for some people in regards to health insurance. It is important to remember, that when in doubt, it is probably better to file a tax return than not filing. Forgetting to file a tax return can lead to IRS penalties and fine. No one wants that. . Here are six tax tips to help you decide whether to file a tax return.

 

Do you need to file a tax return?

  1. General filing requirements.   The need to file a tax return depends on several factors. For most taxpayers, the amount of your income, filing status, and age determine whether you should file  taxes. For example, if you are single and 30 years old, you must file a tax return if your income was at least $ 10,150 in 2015. Other rules may apply if you are self-employed or if you are a dependent of another person. There are other situations in which they must submit. Visit IRS.gov/filing to determine if you need to file a tax return.
  2. New for 2014: ACA Tax Credit.  If you obtained health coverage through the Health Insurance Marketplace in tax year 2014, you may be eligible for a new tax credit. You must file a tax return to claim the credit. If you purchased coverage through the market in 2014 and chose the premium tax credits that were sent in advance directly to the insurance company during the year, you must file a federal tax return. You must reconcile any prepayment premium tax credit allowed. Your health insurance market will provide the form 1095-A, Statement Health Insurance Market in early February.The new form contains the information you need to file your tax return in order to properly be eligible for this tax credit.
  3. Withholding or Paid.   Does your employer withheld federal income tax from your pay? Did you pay over the last year and applied to tax this year? If you answered “yes” to any of these questions, you may have a refund due. But you must file a tax return to get it.
  4. Earned Income Tax Credit (EITC).   Did you work last year and earned less than $ 52,427? You may receive the EITC as a refund if you qualify, with or without a qualifying child. You may be eligible for up to $ 6,143.
  5. Additional Child Tax Credit. Do you have at least one qualifying child for the child tax credit? If you do not receive the full amount of the credit, you may qualify for the Additional Child Tax Credit.
  6. The American Opportunity Credit.   The American Opportunity Credit is available for the first four years of higher education and can be up to $ 2,500 per eligible student. You or your dependent must be students enrolled at least half time during an academic period. Even if you do not owe taxes you may qualify. However, you must file Form 8863, Education Credits, and file a tax return to receive credit. Use the Interactive Tax Assistant Tool on IRS.gov to determine if you can claim the credit. Learn more by visiting online on Education Credits. Instructions for Forms 1040 , 1040A or 1040EZ  listed requirements to file a tax return.

 

Additional IRS Resources on Who Should File Taxes

2014 Earned Income Tax Credit EITC Calculation Example

A formula presentation of the EITC calculation follows (where category reflects EITC factors based on the number of children and filing status, and AGI is equal to gross income from all taxable sources such as earned income, dividends, taxable interest, alimony, capital gains, taxable pensions, etc., less statutory adjustments).

 

2014 Earned Income Tax Credit EITC Calculation Example

EITC =
Lesser of: earned income or maximum earnings amount category
times
credit ratecategory
minus
Greater of 0 or [earned income (or AGI, whichever is larger) minus phase-out income level category times phase-out rate category]

The following three examples for a married couple with two children in tax year 2014, illustrate how the EITC is calculated. Example 1. For a family receiving less than the maximum allowable credit, with earned income and AGI of $10,000 (which is less than the maximum earned income amount):

EITC = $10,000 times 40% = $4,000

Example 2. For a family receiving the maximum allowable with earned income and AGI of $20,000 (which is greater than the maximum earned income amount but less than the phase-out income level):

EITC= $13,650 (the maximum earned income amount) times 40%
= $5,460 (the maximum credit)

Example 3. For a family subject to the phase-out of EITC with earned income and AGI of $25,000 (which is greater than the maximum earned income amount and the phase-out income level):

EITC = $13,650 (the maximum earned income amount) times 40% or $5,460 (the maximum credit)
minus
$1,740 (the amount by which income exceeds the phase-out income level [$23,260]) times 21.06%
or $366
= $5,094

Welfare and the Earned Income Tax Credit EITC

During the 2015 tax year, the IRS is stepping up its enforcement efforts to prevent improper payments of the Earned Income Tax Credit and the Additional Child Tax Credit, according to a new government report. The Internal Revenue Service paid out $14.5 billion in erroneous Earned Income Tax Credit payments and between $5.9 billion and $7.1 billion in improper Additional Child Tax Credit payments in Fiscal Year 2013, according to a new government watchdog report.

Welfare and the Earned Income Tax Credit EITC

The Earned Income Tax Credit (EITC) and Welfare programs increase the ability of workers in low-paying jobs to support themselves and their families. Democrats and Republicans are working to expand the program and it is very important that it has received cross party support that is vital to its future. For example,  in prior tax years, the average EITC payment to a family with children was $2,905, according to the Center for Budget and Policy Priorities.

 

Receiving Earned Income Credit (EITC) when on Welfare

Generally, the EITC has no effect on welfare benefits. In most cases, EITC payments are not used to determine eligibility for Medicaid, Supplemental Security Income (SSI), supplemental nutrition assistance program (food stamps), low-income housing or most Temporary Assistance for Needy Families (TANF) payments. Though unemployment benefits are not earned income, they are taxable income and may affect the amount of EITC.

 

Using VITA for Claiming the Earned Income Credit (EITC)

It is important for individuals who might qualify to double check their status. One way is to use free government programs that help individuals file taxes. Take advantage of a Volunteer Income Tax Assistance (VITA) program. VITA programs offer free tax help to those who generally make $53,000 or less, persons with disabilities, the elderly, and limited English speakers. Qualified individuals can receive basic income tax return preparation assistance from IRS-certified volunteers.  Publication 596, also tells taxpayers how to file the earned income credit,  however it is 39 pages long. Making the EITC simpler would both reduce error rates among honest tax filers, and help the IRS in enforcement against unscrupulous fraudsters.

Using IRS data, TIGTA estimated the potential ACTC improper payment rate for fiscal year 2013 is between 25.2 percent and 30.5 percent, with potential ACTC improper payments totaling between $5.9 billion and $7.1 billion. In addition, IRS enforcement data show the root causes of improper ACTC payments are similar to those of the EITC.

 

IRS EITC Compliance Process

Significant changes in IRS compliance processes would be necessary to make any significant reduction in improper payments, TIGTA pointed out. Expanded authority to allow the IRS to make corrections to tax returns when data obtained from the Department of Health and Human Services indicate the taxpayer’s refundable credit claims are not valid would help reduce improper payments. TIGTA estimates such authority could have potentially allowed the IRS to prevent more than $1.7 billion in questionable EITC payments in tax year 2012.

 

State EITC Programs

State EITCs might give certain residents of different states a much-needed economic boost by building on the successful federal EITC, a tax credit that has been instrumental in lifting families out of poverty and helping them make ends meet. A state EITC structured as a simple add-on to the federal credit would primarily benefit families with children.

The income ranges change each year, but those eligible in 2014 include individuals earning less than $14,590 or $20,020 for those married filing jointly with no qualifying children.

 

More Information about 2015 and 2016 Earned Income Tax credit (2015 EIC)

 

2015 EITC Income Limits and Maximum Credit

The Internal Revenue Service announced annual inflation adjustments for a number of provisions for the year 2015, including tax rate schedules, tax tables and cost-of-living adjustments for certain tax items. Congress made substantial progress in recent years in “making work pay” for low-income families with children by strengthening the Earned Income Tax Credit (2015 EITC) and Child Tax Credit

 

2015 EITC Income Limits and Maximum Credit

Specifically, the IRS established 2015 Earned Income Tax Credit EITC Income Limits. The following information will be applicable below for the 2015 EITC tax year. You may claim the EIC if you were between ages 25 and 64 at the end of 2014 and meet other criteria. A tax credit usually means more money in your pocket. It reduces the amount of tax you owe. Each year the amount of the earned income credit will changes. This information is valid for the 2015 earned income tax credit. It is vital to ensure that you are using amounts for the right year when claiming the EITC.

 

2015 Tax Year Earned Income and adjusted gross income (AGI) must each be less than:

  • $47,747 ($53,267 married filing jointly) with three or more qualifying children
  • $44,454 ($49,974 married filing jointly) with two qualifying children
  • $39,131 ($44,651 married filing jointly) with one qualifying child
  • $14,820 ($20,330 married filing jointly) with no qualifying children

 

 

Children and the 2015 EIC

For the EIC, children must be under 19 at the end of 2014. (Full-time students can be under 24; children who are permanently and totally disabled can be any age.)All childless workers under age 25 are ineligible for the EITC, so young people just starting out —including low-income young men, who have disturbingly low labor-force participation rates — receive none of the EITC’s proven benefits.

2015 EITC Maximum Credits

  • $6,242 with three or more qualifying children
  • $5,548 with two qualifying children $3,359 with one qualifying child
  • $503 with no qualifying children

To receive the EITC in 2015, there is a limitation that investment income must be $3,400 or less for the 2015 tax year.

 

Claiming the 2015 EITC

REMEMBER: These numbers are valid for the tax year 2015, which is effective January 1, 2015. These are not the correct numbers to prepare your 2014 tax returns in 2015. These numbers for the earned income tax credit will be used to prepare a tax year 2015 tax return when it is due April 15, 2016.

Taxpayers may also be eligible for certain state run programs that are similar to the federal EITC which is run by the IRS.

 

IRS Recognizes Legal Same-Sex Marriages

In June 2015, the United States Supreme Court held that all states must allow same-sex couples to marry on the same terms and conditions as opposite-sex couples, and that all states must recognize lawful same-sex marriages performed in other states.

The U.S. Department of the Treasury and the Internal Revenue Service ruled in 2013 that same-sex couples, legally married in jurisdictions that recognize their marriages, will be treated as married for federal tax purposes The ruling applies to all federal tax provisions where marriage is a factor, including filing status, claiming personal and dependency exemptions, taking the standard deduction, employee benefits, contributing to an IRA and claiming the earned income tax credit or child tax credit.

2015 EITC For Same-Sex Marriage

Any same-sex marriage legally entered into in one of the 50 states, the District of Columbia, a U.S. territory or a foreign country will be covered by the ruling. However, the ruling does not apply to registered domestic partnerships, civil unions or similar formal relationships recognized under state law.  Read more here.

 

More Information about 2015 and 2016 Earned Income Tax credit (2015 EIC)