What is the Earned Income Tax Credit (EITC)?

The Earned Income Tax Credit (EITC) is a TAX CREDIT for certain people who work and have low wages. This includes people with disabilities, family members and some employees who work with people with disabilities. You have to file an income tax return form each year to get this Tax Credit. A tax credit usually means MORE MONEY in your pocket. It reduces the amount of tax you owe. The EITC may also give you a REFUND on your income tax return.

In simple terms, you can keep more of what you have earned. If you are one of the many low-income workers who will not file this year because you do not owe any taxes, you may want to think again. The IRS may owe you some money!!!!!

Many people with disabilities are eligible to receive the EITC refund, but they don’t know it. If you worked in 2009 and you qualify for the EITC, you may be eligible to get back some or all of the income tax that was withheld during the year and you may also get extra cash from the IRS.

You may also find that it could be financially beneficial for you to file an amended tax return for any of the last THREE YEARS that you did not claim the EITC in those years. This actually could be quite a bit of money for you to receive!!!

The IRS estimates one in four eligible taxpayers could miss out on this valuable tax credit because they don’t check it out.

Who can claim the credit?

To claim the EITC on your tax return, you must meet all of the following rules:

• Must have a valid Social Security Number
• You must have earned income from employment or from self-employment.
• Your filing status cannot be married, filing separately.
• You must be a U.S. citizen or resident alien all year, or a nonresident alien married to a U.S. citizen or resident alien and filing a joint return.
• You cannot be a qualifying child of another person.
• If you do not have a qualifying child, you must: be age 25 but under 65 at the end of the year, live in the United States for more than half the year, and not qualify as a dependent of another person

Note: 'qualifying child' for the EITC, a child must be your: son, daughter, stepchild, adopted child, eligible foster child, or a descendant of any of them, such as your grandchild; or brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant of any of them (such as your nephew or niece)    who has lived with you for more than half of the year. The individual must be  18 years of age or younger at the end of the tax year. You can also claim young adults up to and including age 23 if they were a full-time student for at least one semester. Lastly, you can claim someone of any age as a 'qualifying child' if that individual is totally disabled.

Tax Year 2009
Earned Income and adjusted gross income (AGI) must each be less than:

• $43,279 (48,279) married filing jointly) with three or more qualifying children
• $40,295 ($45,295 married filing jointly) with two qualifying children
• $35,463 ($40,463 married filing jointly) with one qualifying child
• $13,440 ($18,440 married filing jointly) with no qualifying children

Tax Year 2009 maximum credit:

• $5,657 with three or more qualifying children
• $5,028 with two qualifying children
• $3,043 with one qualifying child
• $457 with no qualifying children

What is Earned Income?

Earned income includes all the taxable income and wages you get from working. There are two ways to get earned income:

• You work for someone who pays you OR
• You work in a business you own.

Taxable earned income includes:

• Wages, salaries, and tips;
• Union strike benefits;
• Long-term disability benefits received prior to minimum retirement age;
• Net earnings from self-employment.
• Combat Pay (Nontaxable combat pay election. You can elect to have your nontaxable combat pay included in earned income for the earned income credit.)

Some examples of Income that is not considered earned:

• interest and dividends
• pensions
• social security
• unemployment benefits
• alimony
• child support.

How do I figure my credit?

Once you know that you qualify for the EITC, you need to know how to figure the amount of the credit. You have some choices on how to figure the credit:

1.Have the IRS figure the credit for you. See Publication 596, or

2.Figure the credit yourself. To do this you must use the Earned Income Credit Worksheet (EIC Worksheet) in the instruction booklet for Form 1040, Form 1040A, or Form 1040EZ, and the Earned Income Credit (EIC) Table in the instruction booklet, or use the EITC Assistant Tool online.

3. Utilize one of RI’s Volunteer Information Tax Sites (VITA) to help you file your return FREE of charge. To locate the nearest VITA site call 1-800-829-1040.

For more information, see Chapter 4, Figuring and Claiming the EITC, in IRS Publication 596

Also the IRS's page on the American Recovery and Reinvestment Act of 2009 affecting individual taxpayers …Tax Benefits, Credits, and Other Information.

What You Can Do?
File your taxes! Even if you do not owe the IRS money, they may owe you.

This Project is currently funded by the RI Developmental Disabilities Council, the national Real Economic Impact Tour (REIT) and Rhodes to Independence, URI College of Pharmacy  (US Department of Human Services, Center for Medicare and Medicaid Services, Medicaid Infrastructure Grant (CFDA 93.768)) and is in collaboration with the IRS.