Earned income tax credit
Earned Income Tax Credit, also called, as EITC is a refundable tax credit that means to reduce the taxes that the various low-income working people in the United States pay. They pay their taxes by means of Payrolls etc . It can also be termed as the wage subsidy that is allowed to the workers in the United States that have low income . It is to be understood here that the EITC is one of the largest tools in the United States that are being adopted by the government to fight and reduce poverty.
Apart from the United States, there are some other countries also that have enacted the Earned Income Tax Credit and these include Canada, United Kingdom, Finland, Belgium etc . The Earned Income Tax Credit is also called as the Earned Income Credit or the EIC . The tax plan was approved by the government in the year 1975 to reduce the burden of social security taxes in United States. We shall be restricting our discussion regarding EITC to United States only. There may be many circumstances when the amount of EITC exceeds the total amount of the taxes owed and in such circumstances, the refund are made to the eligible persons . Let us now see how a person can qualify for the Earned Income Tax Credit .
QUAliFYING FOR THE EARNED INCOME TAX CREDIT
A person has to fulfill the various criteria in order to become eligible for the EITC. First of all, to get qualified, there are certain parameters that the taxpayer must meet . He must also file the tax return whether they had or had not earned the required money for filing the tax return . Any person who has not filed a tax return is not eligible for the earned income tax credit . There are of course certain welfare benefits on which the EITC has no effect . The EITC payments are not generally used for determining the eligibility regarding Supplemental Security Income, Medicaid, low income housing, food stamps or for the TANF payments i .e. Temporary Assistance For Needy families.
For knowing whether a person has qualified for EITC or not, a person can simply answer various questions that are listed at the site of IRS, the Internal Revenue Services. He has to provide some basic information also at the site. This is done through a program called as the EITC Assistant. This not only helps in determine whether a person has qualified for the EITC or not but also in the determination of correct filing status. It also helps a person in knowing if his children qualify for the different types of tests required for a child to qualify and in knowing about the amount of the credit that a person may receive.
The various requirements that a person must fulfill in order to be eligible for the Earned Income Tax Credit are:
1- The person must have a social security number that is valid .
2- He must be filing the returns jointly in case he is married.
3- He must have earned that income by way of self-employment or by way of employment in the United States.
4- He must be a citizen of U.S or the resident alien all year. In case, a person is non-resident, he must be a non-resident alien who is marred to a U .S citizen and filing the joint return .
5- The person can never be a qualifying child of another person, as it is not allowed.
6- If a person is not having any qualifying child, he must be over the age of 25 years but less than 65 years at the end of the year, he must have lived in the United States for more than six months and he must not get qualified as a dependent of other person in U .S
The person filing claim under the Earned Income Tax Credit must not file the forms 2555 or 2555-EZ, which are related to the foreign earned income.
Let us now discuss various aspects related to Earned Income Tax Credit.
VARIOUS ASPECTS RELATED TO EARNED INCOME TAX CREDIT
There are many aspects related to Earned Income Tax Credit that must be understood in order to get complete knowledge. IRS conducted a text for the various taxpayers in the years 2003-05 by asking few of the Earned Income Tax Credit claimants whether they have met the required eligibility requirements for claiming the EITC. It was done to make sure that there are no false cases of EITC . Based upon the findings, many decisions were taken regarding the earned income tax credit payers. There are some special rules regarding EITC and under these special rules, there are various regulations that are used for calculating the EITC for the special class of people in U.S that comprises the U.S Armed Forces in the various combat zones, hurricane victims, Members of clergy and the persons that have disability retirement income.
0in 0in 0pt">One of the largest segment of the people that fall under the category of eligible taxpayers and files the claim for the Earned Income Tax Credit are those low income workers that are having non-qualifying children . Thus, it can be said that the EITC is not for the families that have children and non-family children cannot claim EITC . For example, if a person is over the age of 25 years but is less than the age of 65 years and has an income of less than $12120 in case he has filed single or less than $14120, in case he has filed jointly and is married, he can easily qualify for the earned income tax credit and the amount can be up to $412 . It is to be noted here that if a person is married and he or she files a joint income tax returns, either the person himself or his spouse must meet the various requirements related to age as per the guidelines given for the Earned Income Tax Credit .
Other aspect that needs to be discussed is the various types of earning that are included in the income regarding the Earned Income Tax Credit. The income used for the purpose of EITC includes the salaries, wages, tips and all other taxable pay and earnings that a person gets . This is also applicable to the various persons that are self-employed in the United States . There are of course some types of income that are not taken into account while calculating the total income for claiming the EITC. These incomes includes dividend and interest payments, social security benefits and pensions, different types of unemployment benefits, child support and alimony etc .
THUS, EARNED INCOME TAX CREDIT CAN HELP YOU
If you qualify the various requirements given above and are a low-income worker, you can easily claim for the Earned Income Tax Credit, provided you have filed your all the returns. There are many other aspects, as discussed above, that must be understood before filing for EITC .
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