Each filing season, the IRS sponsors an outreach program to educate taxpayers regarding their eligibility for the Earned Income Tax Credit (EITC). Aimed at assisting millions of Americans, the IRS on Friday launched an Earned Income Tax Credit Awareness Day.
EITC is a federal income tax credit for low to moderate income working individuals and families. This year, individuals who earned less than $50,570 may be entitled for the credit.
The original intent of the EITC was to offset a portion of Social Security and Medicare taxes, thus augmenting take-home income in low-wage jobs. At the same time, the EITC provided an incentive to work and decrease one’s dependency on government and state sponsored programs.
EITC is an after-tax credit, also called a refundable credit, because it reduces the amount of tax one may have to pay, dollar per dollar. It differs from pre-tax credits or deductable credits, which only reduce taxable income, or the amount of income that is subject to taxation.
As a result, a taxpayer with no tax liability can still receive a refund.
Last year, over 27 million individuals took advantage of the EITC, with the government paying out over $62 billion in total EITC dollars.
“A large part of the nation sees major changes every year with their tax situation,” said IRS Acting Commissioner Steven T. Miller. “This year, millions of workers could qualify for EITC for the first time, and the IRS urges them not to overlook this valuable credit.”
The IRS has partnered with over 250 local municipalities and community organizations across the country to spread the word about EITC during the 2012 filing season, set to open January 30. The credit is especially attractive to moderate-income workers and working families, with a maximum credit of up to $5,891 for those with three or more qualifying children.
The annual campaign targets the approximate one-third of Americans who may be newly eligible for the credit. For newly married couples or new parents, or for those who have experienced decreases in their income, they may find they are now able to claim the credit.
According to the IRS, one in five eligible workers and families still miss out on the credit, either because they don’t claim it when filing, or don’t file a tax return at all. Even those who have no legal requirement to file because of low income should still check their eligibility for the EITC.
In order to determine if you are eligible for the credit, use the IRS online tool EITC Assistant.
For more information, check out the IRS EITC YouTube video.