An estimated 26.5 million working households are eligible to take the Earned Income Tax Credit (EITC) on their 2012 tax returns, yet 20 percent will fail to do so, according to the Internal Revenue Service (IRS). To remedy this, the IRS announced today, Jan. 25, the launch of an awareness campaign to educate the public about the availability of this credit to low- and moderate- income workers.
Jan. 25, 2013 had been designated Earned Income Tax Credit Awareness Day, and community organizations across the country are sponsoring outreach events to highlight the benefits of this program that provides a financial boost to workers.
Many eligible taxpayers fail to take the credit when filing a tax return. Taxpayers that are not required to file a tax return may still be eligible for EITC and should file a return specifically to claim the credit, according to the IRS.
“This year, millions of workers could qualify for EITC for the first time, and the IRS urges them not to overlook this valuable credit.” — IRS Acting Commissioner Steven T. Miller
Taxpayers whose income from work falls within an established range may qualify for the credit. Additionally, to qualify, a taxpayer’s investment income cannot exceed $3,200.
Eligible income levels and maximum credit for the 2013 tax filing season (2012 tax returns):
- Families with one child who earn less than $36,920 in 2012 (or less than $42,130 for married workers) are eligible for a credit of up to $3,169.
- Families with two children who earn less than $41,952 in 2012 (or less than $47,162 for married workers) are eligible for a credit of up to $5,236.
- Families with three or more children who earn less than $45,060 in 2012 (or less than $50,270 for married workers) are eligible for a credit of up to $5,891.
- Workers without a qualifying child who earn less than $13,980 in 2012 (or less than $19,190 for married workers) are eligible for a credit of up to $475.
The IRS offers an online EITC assistant application that taxpayers may access to determine their eligibility, the eligibility of their child as a qualifying child, and the estimated amount of their credit.
The Earned Income Credit is a refundable credit. This means that if the credit exceeds the amount of tax liability, the balance will be issued to the taxpayer as a refund.
Several states have an Earned Income Tax Credit as well. State credits are usually calculated as a percentage of the federal credit. Additionally, New York City taxpayers may take an Earned Income Credit equal to 5 percent of their federal credit on their city tax return.
The IRS will begin processing tax returns on Jan. 30. All taxpayers may file electronically, free of charge, at the IRS website using fill-in forms. Income qualified taxpayers may use free tax preparation software offered through the IRS website.