The qualifications for the Earned Income Tax Credit--or EITC--can be a little tricky to figure out. As a result, many people who qualify for EITC--don't claim it, and that costs families thousands of dollars each year.
It's designed to help people working hard to make ends meet. Even those who didn't qualify last year -- might now. In 2012, more than 27 million Americans received nearly $62 billion. The average credit was $2,200.
If your family earned $50,270 or less last year--it's worth investigating.
But there are a few things to know up front:
- to get the credit, taxpayers must file, even though they may not be required to
- you may still get money back despite having no taxes withheld
- and, be aware: there are a whole host of very specific requirements for everyone filing--including children--that range from income limits to having valid social security numbers for each family member.
Because it can be complicated, this might be one time qualifying individuals should seek out professional help. The IRS' volunteer Income Tax Assistance Program offers free tax preparation for low-to-moderate income earners. To find a nearby site, visit www.irs.gov and type the word "vita" in the search engine, then click on "free tax return preparation for you by volunteers."
Because it is so lucrative, EITC is ripe for abuse. Don't pay any exorbitant fees upfront just because an accountant promises you a big payday. Consider using a good tax software system to avoid the con altogether.