EIC Changes: Preview of Tax Year 2010

EIC or EITC is a refundable tax credit, meaning you can get money back even if you owe no federal income tax or had no tax withheld. And, if you owe tax, it can offset the amount you must pay. Below is a preview of the new 2010 earning limits and maximum credit amounts. This information was valid for the EITC in the 2010 tax year.

 

Note: The 2010 EIC Table is now available.

Earned income and adjusted gross income (AGI) must each be less than:

  • $43,352 ($48,362 married filing jointly) with three or more qualifying children
  • $40,363 ($45,373 married filing jointly) with two qualifying children
  • $35,535 ($40,545 married filing jointly) with one qualifying child
  • $13,460 ($18,470 married filing jointly) with no qualifying children

 

Tax Year 2010 maximum credit:

  • $5,666 with three or more qualifying children
  • $5,036 with two qualifying children
  • $3,050 with one qualifying child
  • $457 with no qualifying children

*The American Recovery and Reinvestment Act (ARRA) provides a temporary increase in EITC and expands the credit for workers with three or more qualifying children. These changes are temporary and apply to 2009 and 2010 tax years.

 

EIC Changes: Preview of Tax Year 2010

Investment income must be $3,100 or less for the year.

The maximum Advance EITC workers can receive from their employers is $1,830.

EITC Awareness Day

An expanded Earned Income Tax Credit (EITC) means larger families will qualify for a larger credit, offering greater relief for people who struggled through difficult financial times last year, the Internal Revenue Service said today.

The IRS and the Treasury Department marked EITC Awareness Day as their partners nationwide worked to highlight the availability of this important tax credit. EITC, which is in its thirty-fifth year, is one of the federal government’s largest benefit programs for working families and individuals. Last year, nearly 24 million people received $50 Billion in benefits. The average credit was more than $2,000.

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“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.”

 

EITC Awareness Day

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, 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

The maximum amount of investment income is $3,100 for tax year 2009. For families, there are also certain requirements for child residency and relationship that must be met. Additional eligibility information is available in FS-2010-11 and on the Web at IRS.gov/EITC.

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.

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.

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 Jan. 30, Feb. 6 and Feb. 20.

There is an online EITC Assistant also available on IRS.gov which can help taxpayers and tax preparers determine eligibility.

More than 65 percent of EIC returns are prepared by a third party. The IRS urges taxpayers to choose a reputable tax preparer to avoid problems that come with an inaccurate tax return. The agency also urges tax preparers to follow due diligence requirements when preparing an EIC tax return.

2009 EIC Table

Here is 2009 Publication 596 – Earned Income Credit. The 2009 EIC Table begins on page 46 of the document.

 

2009 Publication 596 – Earned Income Credit

You can read it online here or optionally download it to your computer at the bottom of the page. Be sure to read through some of the new Earned Income Credit changes before going straight to the 2009 EIC chart. This is the EIC chart for the filing of your 2009 taxes.

Looking for the 2010 EIC Chart?

 

New Rules for 2009 Tax Year

New for tax year 2009, are the additional EITC and income thresholds for a third qualifying child and changes to the uniform definition of a child. For tax years 2009 and 2010, the American Recovery and Reinvestment Act created a new category three or more children, which will provide larger credits to larger families.

The change in the uniform definition of a child adds two new rules to the definition of a “qualifying child.” The child must:

 

  • Be younger than the person claiming the child, unless the child is permanently and totally disabled.
  • Not have filed a joint return other than to claim a refund.

 

Also new for 2009, if a qualifying child can be claimed by both a parent and another person, the other person must have an AGI higher than the parent in order to claim the child for EITC purposes.

 

 

 

Ten Tax Tips for Taxpayers with Children and Students

Do you have children? Having children or students enrolled in higher education will most likely change your tax situation. Below you will find 10 things you should consider before filing your taxes.

Dependents – In most cases, a child can be claimed as a dependent the first year they were born. There are however a few exceptions to this. Refer to the IRS publication 501 – Exemptions, Standard Deduction, and Filing Information.

Child Tax Credit – For each of your children under age 17, you may be able to take this credit. If you only qualify for a partial credit instead of the full Child Tax Credit, you may be eligible for the Additional Child Tax Credit. Even if you don’t owe any tax, you may still be eligible for the Additional Child Tax Credit which is a refundable credit and may give you a refund. See IRS Publication 972, Child Tax Credit

Child and Dependent Care Credit – If you work or are looking for work and you have to pay someone to care for your child under the age of 13, you may be able to claim this credit. See IRS Publication 503, Child and Dependent Care Expenses.

Earned Income Credit – The EITC or EIC is a great benefit for taxpayers who work and have earned income from wages, self-employment or farming. The EITC reduces the amount of tax you owe and may also give you a refund. See IRS Publication 596, EIC Table to see if you qualify and check your AGI in the EIC table.

Adoption Credit – If you adopted a child you may be eligible for a tax credit covering your qualifying expenses paid to adopt an eligible child. qualifying expenses paid to adopt an eligible child. See the instructions for IRS Form 8839, Qualified Adoption Expenses.

Children with Earned Income – If your child has income earned from working they may be required to file a tax return. For more information see IRS Publication 501.

Children with Investment Income – Under certain circumstances a child’s investment income may be taxed at the parent’s tax rate. For more information see IRS Publication 929, Tax Rules for Children and Dependents.

 

Student Tax Tips

Coverdell Education Savings Account – This savings account is used to pay qualified educational expenses at an eligible educational institution. Contributions are not deductible, however, qualified distributions generally are tax-free. For more information see IRS Publication 970, Tax Benefits for Education.

Higher Education Credits – Education tax credits can help offset the costs of education. The American Opportunity and the Lifetime Learning Credit are education credits that reduce your federal income tax dollar-for-dollar, unlike a deduction, which reduces your taxable income. For more information see IRS Publication 970.

Student Loan Interest – You may be able to deduct interest you pay on a qualified student loan. The deduction is claimed as an adjustment to income so you do not need to itemize your deductions. For more information see IRS Publication 970.

File Taxes Online Free

You may be eligible for free tax filing!

The IRS estimates that 70 percent of all taxpayers (about 98 million taxpayers) will be eligible to file federal taxes online for free this year!

Only 4.8 million tax returns were filed through Free File last year, an increase of 24 percent over the previous year’s total of nearly 3.9 million returns, but still way below the number of people who are eligible to file taxes online for free!

Depending upon your adjusted gross income and on how complicated your taxes are, you may be eligible to file taxes online free. For example, if you do not need to itemize and you only have a few standard deductions such as claiming the Earned Income Credit (EIC), you may be eligible.

Be sure when you start your free tax filing using any of the listed tax programs (at right or below) that you start with the Free Version to see if you are eligible to file your federal taxes online for free.

 

e-File and Direct Deposit

Be sure to e-file and use direct deposit. You will receive your tax refund much quicker by filing your taxes electronically and having the refund direct deposited. The IRS typically claims it will take between 8 – 15 days to receive your direct deposit, but we have seen it typically be 7 – 10 days. Direct deposits are usually received on Fridays, but your bank may differ depending on how fast they handle direct deposits.

Certain tax programs allow you to split your refund, so you could have half deposited into your checking and half in your savings account. Some even allow you to deposit into three accounts such as savings, checking and an IRA.

EIC Eligibility Checklist

You may claim the EIC if you answer “Yes” to all the following questions.*

Yes No
1. Is your AGI less than:

  • $12,590 ($14,590 for married filing jointly) if you do not have a qualifying child,
  • $32,241 ($35,241 for married filing jointly) if you have one qualifying child, or
  • $37,783 ($39,783 for married filing jointly) if you have more than one qualifying child?

    (See Rule 1.)

X X
2. Do you, your spouse, and your qualifying child each have a valid SSN? (See Rule 2.) X X
3. Is your filing status married filing jointly, head of household, qualifying widow(er), or single? (See Rule 3.)

Caution: If you or your spouse is a nonresident alien, answer Yes only if your filing status is married filing jointly. (See Rule 4.)

X X
4. Answer “Yes” if you are not filing Form 2555 or Form 2555-EZ. Otherwise, answer “No.” (See Rule 5.) X X
5. Is your investment income $2,900 or less? (See Rule 6.) X X
6. Is your total earned income at least $1 but less than:

  • $12,590 ($14,590 for married filing jointly) if you do not have a qualifying child,
  • $32,241 ($34,241 for married filing jointly) if you have one qualifying child, or
  • $37,783 ($39,783 for married filing jointly) if you have more than one qualifying child?

    (See Rules 7 and 15.)

X X
7. Answer Yes if you (and your spouse if filing a joint return) are not a qualifying child of another person. Otherwise, answer No. (See Rules 10 and 13.) X X
STOP: If you have a qualifying child, answer questions 8 and 9 and skip 10-12. If you do not have a qualifying child, skip questions 8 and 9 and answer 10-12.*
8. Does your child meet the age, residency, and relationship tests for a qualifying child? (See Rule 8.) X X
9. Is your child a qualifying child only for you? Answer Yes if your qualifying child also meets the tests to be a qualifying child of another person, but the other person is not claiming any child-related tax benefits using that child. Answer No if you do not know whether the other person is claiming any child-related tax benefits using that child. X X
10. Were you (or your spouse if filing a joint return) at least age 25 but under age 65 at the end of 2007? (See Rule 11.) X X
11. Answer Yes if you (and your spouse if filing a joint return) cannot be claimed as a dependent on anyone else’s return. Answer No if you (or your spouse if filing a joint return) can be claimed as a dependent on someone else’s return. (See Rule 12.) X X
12. Was your main home (and your spouse’s if filing a joint return) in the United States for more than half the year? (See Rule 14.) X X
*PERSONS WITH A QUALIFYING CHILD: If you answered Yes to questions 1 through 9, you can claim the EIC. Remember to fill out Schedule EIC and attach it to your Form 1040 or Form 1040A. You cannot use Form 1040EZ. If you answered Yes to questions 1 through 8 and No to question 9, see Rule 9 to help you determine whether you can claim the EIC. If you answered Yes to questions 1 through 7 and No to question 8, answer questions 10 through 12 to see if you can claim the EIC without a qualifying child.
PERSONS WITHOUT A QUALIFYING CHILD: If you answered Yes to questions 1 through 7, and 10 through 12, you can claim the EIC.
If you answered “No” to any question that applies to you: You cannot claim the EIC.

A Qualifying Child For The EIC Is

Qualifying Child for EITC

A qualifying child for the EIC is a child who is your…
Son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, or a descendant of any of them (for example, your grandchild, niece, or nephew)
AND

child

was… Under age 19 at the end of 2009 and younger than you (or your spouse, if filing jointly) or Under age 24 at the end of 2009, a student, and younger than you (or your spouse, if filing jointly) or Any age and permanently and totally disabled
AND

Who is not filing a joint return for 2009 (or is filing a joint return for 2009 only as a claim for refund)
AND

Who lived with you in the United States for more than half of 2009. If the child did not live with you for the required time, see Exception to time lived with you on page 44 of the Form 1040A instructions or page 50 of the Form 1040 instructions.

CAUTION

If the child was married or meets the conditions to be a qualifying child of another person (other than your spouse if filing a joint return), special rules apply. For details, see page 45 of the Form 1040A instructions or page 51 of the Form 1040 instructions.

Do you want part of the EIC added to your take-home pay in 2010? To see if you qualify, get Form W-5 from your employer, call the IRS at 1-800-TAX-FORM (1-800-829-3676) or download below.

2009 Tax Forms:

Schedule EIC
2010 Form W-5
2009 – 1040
2009 – 1040a
1040 Instructions
2009 Publication 596

Earned Income Credit Changes For 2009

Earned Income Credit Changes For 2009

New for tax year 2009, is the additional EITC and income thresholds for a Third Qualifying Child and Changes to the Uniform Definition of a Child The change in the Uniform Definition of a Child adds two new rules to the definition of a “qualifying child.” The child must:

  • Be younger than the person claiming the child
  • Not have filed a joint return other than to claim a refund

For more information on whether a child qualifies you for the EITC, see Publication 596, Chapter 2, Rules If You Have a Qualifying Child. Publication 596 for tax year 2009 is available below.

Earned Income and adjusted gross income (AGI) 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

 

Tax Year 2009 maximum credit:

  • $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

Investment income must be $3,100 or less for the year.

The maximum of Advance EITC workers can receive from their employers is $1,826.

 

Earned income credit (EIC)

The EIC has increased for people with three or more children and for some married couples filing jointly.

The maximum AGI you can have and still get the credit also has increased. You may be able to take the credit if your AGI is less than the amount in the above list that  applies to you.

 

Divorced or separated parents

A noncustodial parent claiming an exemption for a child can no longer attach certain pages from a divorce decree or separation agreement instead of Form 8332 if the decree or agreement went into effect after 2008. The noncustodial parent must attach Form 8332 or a similar statement signed by the custodial parent and whose only purpose is to release a claim to exemption.

 

Definition of custodial parent for EITC

Beginning  in 2009, new rules apply to determine who is the custodial parent for tax purposes. See Custodial parent and noncustodial parent. Page 31 in Publication 17

Publication 17 – IRS Tax Guide
2009 Publication 596 – Earned Income Credit The EIC chart starts on page 46.

Earned Income Credit Changes For 2008

Here are the changes to the Earned Income Credit for 2008.

The maximum amount of the Earned Income Credit (EIC) has increased. The most you can get is:

  • $2,917 if you have one qualifying child
  • $4,824 if you have more than one qualifying child or
  • $438 if you do not have a qualifying child.

The maximum amount of income you can earn and still get the credit has also increased for 2008. You may be able to take the credit if:

  • You have more than one qualifying child and you earn less than $38,646 ($41,646 if married filing jointly),
  • You have one qualifying child and you earn less than $33,995 ($36,995 if married filing jointly), or
  • You do not have a qualifying child and you earn less than $12,880 ($15,880 if married filing jointly).

 

Earned Income Credit Changes For 2008

The maximum amount of AGI you can have and still get the credit also has increased. You may be able to take the credit if your AGI is less than the amount in the above list that applies to you.

The maximum amount of investment income you can have and still get the credit has increased to $2,950 for 2008.

If you get advance payments of the credit from your employer with your pay check, the total advance payments you get during 2008 can be as much as $1,750.

Nontaxable combat pay election

You can elect to include your nontaxable combat pay in earned income when you figure your earned income credit for 2008. This election was due to expire at the end of 2007 but has been extended to years after 2007.

2009 EIC Chart – 2009 EIC Chart
Download 2008 Earned Income Credit Pub 596

IRS EITC Awareness

The IRS, the Department of Treasury and other non-government partners are kicking off EITC (Earned Income Credit) Awareness to promote the refundable tax credit for low-wage workers with children. There is special day held once a year to promote this important tax initiative to help families earning below a certain income limit and are eligible for the EITC.

Believe it or not, there are many taxpayers who are eligible to receive the Earned Income Credit, but fail to claim it simply because they are not informed,” claimed U.S. Treasurer Anna Escobedo Cabral.

According to IRS data, over 22.4 million taxpayers received more than $43.7 billion from the EITC last year. However, they estimate that approximately one in four eligible taxpayers fail to claim the EITC.

Ensuring that more eligible families receive their EITC is important this year, as it is every year. I encourage people all across America to check to see if you are eligible for the Earned Income Tax Credit,” said Treasury Secretary Henry M. Paulson, Jr.

 

IRS EITC Awareness

IRS invites community organizations, elected officials, state and local governments, schools, employers, and other interested parties to join a national grassroots effort on EITC Awareness Day, January 30, 2015, to spotlight EITC. IRS estimates four of five eligible taxpayers claim and get this important credit. Help ensure everyone gets the EITC they earned.  Best of all, EITC is a financial boost for working people and your local economy.

 

EITC is for workers whose income does not exceed the following limits in 2014:

  • $46,997 ($52,427 married filing jointly) with three or more qualifying children
  • $43,756 ($49,186 married filing jointly) with two qualifying children
  • $38,511 ($43,941 married filing jointly) with one qualifying child
  • $14,590 ($20,020 married filing jointly) with no qualifying children
  • ** Investment income must be $3,350 or less.

EITC can be a boost to you, your family and community. Anyone with earnings of $52,427 or less should see if they qualify at www.irs.gov/eitc or visit a volunteer tax assistance site.

Four of five eligible workers claim and get their EITC. We want to raise that number to five out of five. You earned it, “now file, claim it and get it.” See if you qualify at www.irs.gov/eitc.

 

Workers at risk for overlooking claiming the EITC include:

  • Living in non-traditional homes, such as a grandparent raising a grandchild
  • Whose earnings declined or whose marital or parental status changed
  • Without children
  • With limited English skills
  • Living in rural areas
  • Who are Native Americans
  • With earnings below the filing requirement
  • Who have disabilities or are raising children with disabilities

 

If you qualify for the Federal EITC, you may also be eligible for a similar credit from your state or local government. Twenty-four states, plus local municipalities including the District of Columbia, New York City and Montgomery County, Maryland, offer residents an earned income tax credit for 2014.