EITC is short for earned income tax credit, and it's accessible to taxpayers that have low to medium revenue. It was established during 1975 to assist with offsetting the huge burden of Social Security taxes and act as motivation for low-income taxpayers to keep working. If you meet the legal necessities that are used by the IRS you could claim the earned income tax credit.
About the EITC
The EITC is a tax credit that's refundable, meaning it can be utilized to decrease your taxable income under 0 and produce a tax refund. The IRS uses the cost of living to adjust the maximum amount of EITC permitted and income limitations linked to claiming it yearly. To claim the credit it is necessary for you to meet specific requirements. You claim the EITC by filing Schedule EIC with your tax return if you have a kid or kids that qualify.
To be eligible for the EITC you have to meet the following requirements underneath:
- A valid Social Security number is necessary.
- You've got to be a U.S. resident or a full-year resident noncitizen.
- You need to have accumulated revenue (wages, salaries, self-employment income, and so forth.) and meet the EITC income limits.
- You can't claim the credit if you're married and filing a different return, file Form 2555 or 2555-EZ, possess more than $3,200 of investment revenue (2012 amount), or if you could be the qualifying kid of some other individual. You could claim the EITC with no qualifying kid and filing Schedule EIC if you aren't claimed as a dependent on someone else's return, reside in the U.S. for longer than half the year and are around ages 25 and 65.
If you're filing Schedule EIC, it's because you happen to be claiming the EITC with at least one qualifying child (maximum of 3). Your kid has to meet the tests for residency, joint returns, age, and relationship to be given thought of as a qualifying kid. The kid has to:
- Have lived with you for longer than half the entire year
- At the conclusion of the tax year be under the age of 19 - or 24 if a student full time - and not have filed a joint return
- Be your son, daughter, brother, sister, stepbrother, stepsister or a foster child lawfully put under your guardianship.
- When it comes to claiming a child that qualifies only one person can do it. The IRS has a tie breaker in order to figure out who claims the child, that's if the child is the qualifying child for more than 1 individual.
Calculating the credit
When it comes to calculating the amount of your EITC there are a couple of ways to do it. Firstly, you could use the earned income credit worksheet and earned income credit table located inside the 1040 Instruction Booklet to calculate the credit on your own. Whenever filing Schedule EIC and claiming the credit with a qualified kid or kids, it is vital that you discover your credit amount in the correct column for your filing status and quantity of qualifying kids in the earned income credit table. Secondly, you could decide to have the Internal Revenue Service determine your credit amount for you if you don't want to calculate the credit on your own. It's possible to accomplish this by putting in "EIC" online 64a of Form 1040.
The quantity of EITC you are eligble for will increase with the amount of qualified kids (as much as 3) and with the quantity of your earned revenue as much as $50,270 and can lead to a credit as high as $5,891 for 3 kids (lesser sums for 1 or 2 kids; all sums are for 2012).
Of course, when using TurboTax to put together your taxes, we’ll ask you easy questions in clear English, then take care of all the calculations on your behalf. We’ll let you know precisely how much of the EITC you are eligible to get.