February 2012

Don’t Miss Out on the Earned Income Credit
Written by: Karen Reed

Every year millions of Americans take advantage of the Earned Income Tax Credit, a tax incentive that helps boost income for working families and individuals with low to moderate income. But with the large number of people who have recently experienced a reduction in income, such as a lay–off, or life changes, such as a marriage or birth of a child, the IRS estimates that one in five eligible workers is missing out on the credit.

The Earned Income Tax Credit is available to workers who earn $49,078 or less from wages or self–employment. The amount of the credit a taxpayer may receive will depend on the income earned, filing status, and number of qualifying children. The credit ranges from $464 for taxpayers with no qualifying children to $5,757 for those with three or more. The average credit received last year was about $2,200. This credit is a refundable credit, which means it can reduce the balance owed, create a refund or add to an existing refund.

In order to receive the credit, several requirements must be met, and it is not possible to receive it without filing the federal tax return. Most tax preparation software will alert you to your potential eligibility and take you step by step through the rules to see if you qualify. But unless all of the related questions are answered, the tax program will not include the credit on your return. If there’s a chance you might qualify, be sure to complete all of the questions in the Earned Income Credit section of your tax program – or seek the assistance of a qualified tax professional.

This information is being provided to the taxpayer as required by the Internal Revenue Service and follows the guidelines for best practices for tax advisors per Circular 230 §10.33(a)(1–4), and § 10.35(b)(2), (8), and (10). As by definition, this written statement may be considered to be a “covered opinion” as defined by the Internal Revenue Service. This statement(s), along with subsequent correspondences, is not intended or written to be used, and cannot be used by the taxpayer, for the purpose of avoiding lawful penalties that may be imposed on the taxpayer by the Internal Revenue Service. The principal purpose of any stated tax advice included here has as its purpose to claim tax benefits in a manner consistent with the statutes and Congressional intent.