REPORT FROM THE IRS – With the federal tax return deadline of April 17 on the near horizon, the IRS wants to remind Hawaii taxpayers about the Earned Income Tax Credit (EITC), a financial boost for workers earning $49,078 or less in 2011. Four out of five eligible taxpayers filed for and received their EITC last year. For tax year 2010 returns filed in 2011, there were 105,806 Hawaii taxpayers who claimed the credit and received $215 million with an average EITC amount of $2,028.
Millions of workers will qualify for EITC for the first time this year as the population of eligible workers is very fluid. Workers move into and out of eligibility based on changes in their marital, parental and financial status. Approximately one-third of EITC population changes every year.
“People can easily overlook this important credit, especially if their financial situation has changed,” said IRS spokesman David Tucker II. “We want to remind Hawaii taxpayers to look into this valuable credit to see if they qualify.”
People can see if they qualify by visiting IRS.gov and answering a few questions using the EITC Assistant. Workers who earned $49,078 or less from wages, self-employment or farm income last year could receive larger refunds if they qualify for the EITC. That could mean up to $464 in EITC for people without children, and a maximum credit of up to $5,751 for those with three or more qualifying children. Unlike most deductions and credits, the EITC is refundable. In other words, eligible people may get a refund from the IRS even if they owe no tax.
Here are eight facts to consider regarding claiming EITC:
1. If you are eligible for EITC, you must file a federal income tax return and specifically claim the credit – even if you are not otherwise required to file. Remember to include Schedule EIC, Earned Income Credit when you file your Form 1040 or, if you file Form 1040A, use and retain the EIC worksheet.
2. You do not qualify for EITC if your filing status is Married Filing Separately.
3. You must have a valid Social Security number for yourself, your spouse – if filing a joint return – and any qualifying child listed on Schedule EIC.
4. You must have earned income. You have earned income if you work for someone who pays you wages, you are self-employed, you have income from farming, or – in some cases – you receive disability income.
5. Married couples and single people without children may qualify. If you do not have qualifying children, you must also meet the age and residency requirements, as well as dependency rules.
6. Special rules apply to members of the U.S. Armed Forces in combat zones. Members of the military can elect to include their nontaxable combat pay in earned income for the EITC. If you make this election, the combat pay remains nontaxable.
7. It’s easy to determine whether you qualify. The EITC Assistant, an interactive tool available on the IRS website, removes the guesswork from eligibility rules. Just answer a few simple questions to find out if you qualify and estimate the amount of your EITC.
8. Free help is available at Volunteer Income Tax Assistance sites to help you prepare and claim your EITC. If you are preparing your taxes electronically, the software will figure the credit for you. To find a VITA site near you, visit www.irs.gov.
For more information about the EITC, see IRS Publication 596, Earned Income Credit. You can download this publication – available in English and Spanish – from the IRS website or order it by calling 800-TAX-FORM (800-829-3676).