About the EITC

The Earned Income Tax Credit, or EITC, is a both a federal AND N.C. income tax credit that benefits low-and moderate-income working families. The credit is refundable, which means that if the amount of EITC you qualify for is more than the taxes you owe, the IRS will send you the difference. You can even get the EITC if you do not owe any taxes and are not required to file a federal tax return based on your income. However, you must file a federal income tax return in order to get the EITC.

How do workers know if they qualify for the credit? Below is a chart that shows who is eligible for the EITC, based on their earned income in 2009. For example, a married couple filing a joint tax return that has three or more children can qualify for up to $5,940 in combined federal and NC EITC.

 

Who is eligible for the EITC?

Workers who qualify for the EITC must file a federal tax return in order to access the credit, even if they would normally not do so because their earnings are too low to pay taxes. Taxpayers must file either Form 1040 or Form 1040A and attach Schedule EIC.

Those eligible for the EITC must be able to answer “YES” to the following for the year 2009:

• I had earned income from employment or self-employment.
• My investment income (such as bank account interest) was $3,100 or less.
• My tax filing status is NOT married filing separately (if you are married, you must file jointly).
• I have been a U.S. citizen or a resident alien all year OR a non-resident alien married to a U.S. citizen OR a resident alien who is filing a joint return.
• I am NOT a qualifying child being claimed on another person’s tax return.
  A qualifying child must:
  • Be your son, daughter, step-child, eligible foster child (or descendant of any of them, for example a grandchild), brother, sister, half-brother, half-sister, step-brother, step-sister (or a descendant of any of them, for example a niece or nephew). Under certain circumstances, a child who is not a relative but is living in your home may meet the guidelines for a dependent child. Ask your tax preparer if this is your situation.
  • Be under age 19 at the end of 2009, a full-time student under the age of 24 at the end of 2009 or have a permanent and total disability at any time during the year;
  • Have lived with the taxpayer in the United States for more than half of the year.
• If I do not have a qualifying child, I:
  • am at least 25 years of age but under 65 at the end of 2009;
  • lived in the United States for more than half the year (military personnel overseas are considered to be living in the U.S. while on active duty); and
  • am not the qualifying dependent of another person.

YOU MAY STILL QUALIFY FOR THE EARNED INCOME TAX CREDIT (EITC) EVEN IF…

1. I EARN SO LITTLE, I DON’T HAVE TO FILE A RETURN OR DON’T OWE TAXES...
Even if you aren’t required to file a tax return, you can still qualify for the EITC. And if you are eligible for more EITC than you owe in taxes, the government will give you the difference.

2. I DON’T HAVE CHILDREN...
Single persons and married couples without children may still qualify for the EITC. While the benefit amount is smaller for those without children, you may still qualify for up to $480 in Federal ($457) and NC ($23) EITC.

3. I CARE FOR CHILDREN WHO ARE NOT MY OWN…
Grandparents, foster parents and others caring for children may claim the EITC if they meet eligibility requirements. Lucinda and John care for grandchildren living in their home for more than six months of the tax year and could receive an EITC refund of more than $5,000.

4. I RUN MY OWN BUSINESS…
Small business owners and people who are self-employed are eligible for the EITC if they meet other eligibility guidelines. Mary runs a childcare business and thought she earned too much to qualify. But after deducting business expenses, she found she qualified. Now Mary keeps a careful record of expenses over the year to determine if she qualifies for the EITC.

5. I’M CURRENTLY UNEMPLOYED, OR ONLY WORKED PART OF THE YEAR…
If you had earned income at some point during the year, you may still qualify for the EITC.

6. I’M AFRAID OF LOSING MY OTHER BENEFITS…
The EITC does not count as income in determining eligibility for benefits like cash assistance, Medicaid, food stamps, SSI, or public housing. Some benefit programs count the EITC as a resource under certain circumstances. Contact your local Department of Social Services office to find out more.

7. I DON’T TAKE HANDOUTS…
The EITC is tax law -- it is not about handouts or hand-ups. Congress created the EITC to make the tax system fairer for all and to reward work. That is why Congress made the EITC tax law.


Click here to view the IRS EITC Eligibility Assistant to see if you qualify.

 

Can Tax Filers File or Amend Existing Returns to Claim EITC from Earlier Years?

Yes.If you believe that you were eligible for the EITC for this year and/or one or both of the past two years but failed to claim it, you can either:

• File a new tax return for this year and one or both of the past two years, if you did not already file a tax return, and claim the EITC; or
• File an amended return if you have already filed a tax return this year and/or one or both of the past two years but failed to claim the EITC, even though you were eligible.
• If you are not certain whether you qualify, be sure to ask your tax preparer to check for you.

Some families are eligible for tax credit refunds for up to three years, potentially worth thousands of dollars. The IRS website has tax forms and eligibility requirements for prior years, or ask your tax preparer at a free tax prep program or elsewhere to file an amended return for you.

What is the Advance EITC?

The Advance Earned Income Tax Credit (AEITC) allows some tax payers to receive some of their EITC refund in their paychecks and then the rest when they get their tax refund, rather than as one lump sum. For those that qualify (meaning that they are eligible for the EITC and have at least one qualifying child), they can receive part of their EITC refund amount in each paycheck during the year that they qualify. In order to receive the advance credit, individuals must fill out a W-5, the Earned Income Credit Advance Payment Certificate. This form is available on the IRS website and/or should be accessible through employers. For more information about the advance EITC, go to http://www.irs.gov/individuals/article/0,,id=96515,00.html.