What is an earned income tax credit and do you qualify for it?

National Earned Income Tax Credit Awareness Day

Today is National Earned Income Tax Credit Awareness Day! The Earned Income Tax Credit (EITC) is the nation’s largest program for low- and moderate-income workers. According to the IRS, about 31 million eligible taxpayers received the EITC last year, and the average EITC was about $2,043. However, millions of taxpayers are still missing out on this valuable tax credit, and the IRS reports that one in five qualified taxpayers do not claim the tax credit.

You may be wondering why anyone would lose a tax credit of up to $6,935 in fiscal year 2022 for a family with three or more children? Well, many people who qualify for the credit miss out on it because they just qualified or choose not to file a tax return because their income is below the IRS income filing limit (for fiscal year 2022 is $12,950 for those unique Y $25.900 For those married filing jointly).

As a consequence of the events that occurred in 2022You may have experienced lower income and recently qualified for the EITC when you may not have been eligible before, but to get the credit, you need to make sure you file your federal tax return this year.

Want to learn more about the EITC? Here are answers to important questions about the tax credit and information on how you can qualify.

What exactly is the Earned Income Tax Credit?

The EITC is a refundable tax credit given to taxpayers who earn low to moderate income from work or self-employment. While you can eliminate the taxes you owe, you can also receive a taxes devolution by the amount of your credit if the credit is more than the amount of tax you owe.

Who is eligible to claim the Earned Income Tax Credit?

Generally speaking, you may be eligible for the EITC if you meet the income limits below and all of the following apply:

• Are a U.S. citizen or year-round resident alien
• Have a valid Social Security number by the expiration date of his fiscal year 2022 return (including extensions)
• You must meet certain requirements if you are separated from your spouse and not filing a joint return
• You have earned income from your job. Unemployment income does not count.
• You may qualify if you have income from a home business or provide services
• You cannot file Form 2555 (relating to foreign earned income)

Although you may have interest, dividends, and other investment earnings, your investment income must be $10,300 or less in 2022. But most importantly, you must file your federal taxes to claim this valuable credit.

What are the income limits?

The limits are adjusted each year, and for the fiscal year 2022your earned income and adjusted gross income must be no more than:

• $53,057 $59,817 married filing jointly) with three or more qualifying children
• $49,399 $55,529 married filing jointly) with two qualifying children
• $43,492 $49,622 married filing jointly) with a qualifying child
• $16,480 $22,610 married filing jointly) with no qualifying children

What is the amount of the credit?

Your income and the number of qualifying children will determine the actual amount of your credit.

By fiscal year 2022 the maximum credits are the following:

• $6,935 with three or more qualifying children
• $6,164 with two qualifying children
• $3,733 with a qualifying child
• $560 no qualifying children

What is a qualifying child?

A child qualifies if they meet four tests of age, relationship, residency, and joint return as follows:

1. Years: Generally, your child must be under the age of 19, under the age of 24 if they are a full-time student, or any age if they have a permanent and total disability.
2. Relationship: Your child must be your son, daughter, adopted child, or stepchild (including all of their respective children). Your “qualifying child” can also be your brother, sister, half brother or sister, or stepsister or brother (including all of their children).
3. Home: Your child must have lived with you in the US for more than half the year.
4. Joint declaration: Your child must not have filed a joint return. If they filed a joint return, it should have been because they were filing for a tax refund, not because they were actually required to file.

When can I expect to receive my refund if it includes EITC or Additional Child Tax Credit?

Under the Protecting Americans Against Tax Hikes (PATH) Act, Signed into law in December 2015, the IRS cannot issue refunds that include the Earned Income Tax Credit (EITC) and the Additional Child Tax Credit (ACTC) before mid-February.

The PATH Act, which applies to all methods of tax preparation, is intended to help detect and prevent tax fraud. The extended refund release also gives the IRS more time to ensure that taxpayers are correctly claiming the credits so that they get the refund they are owed.

The IRS began accepting and processing tax returns on January 23, 2023and anticipate Half of February for many EITC and ACTC filers if they file electronically with direct deposit and there are no problems with their tax returns.

The IRS encourages you to file as soon as possible so you can get closer to your tax refund!

What if I haven’t filed my taxes for a couple of years and I may be eligible for the EITC in prior years?

If you haven’t filed your taxes for a few years, this is a good time to file your past tax returns, as you may be eligible for the EITC in those earlier years. If you are owed a tax refund, you have three years from the filing deadline to file your tax return for a tax refund or to claim a credit such as the Earned Income Tax Credit. So if you didn’t file your 2019 taxes, you would have up to April 18, 2023, file to claim the EITC.

The IRS reports close to a billion dollars in unclaimed tax refunds each year, and many taxpayers are surprised to discover that some of this money belongs to them in the form of the Earned Income Tax Credit when they file prior years’ returns. Tax returns from prior years must be mailed, but TurboTax has prior year tax products so you can file prior years’ taxes. If you filed a tax return for those years but did not claim the EITC and were eligible, you will need to file an amended return for that year.

Don’t worry about knowing the EITC tax rules when you file your tax return. TurboTax it will ask you simple questions about yourself and calculate the tax credit if you qualify based on your answers.

Lisa has over 20 years of tax preparation experience. Her success is attributed to being able to interpret tax laws and helping clients better understand them. She has held positions as public auditor, controller, and operations manager. Lisa has appeared on the Steve Harvey Show, the Ellen Show, and on major news to break down the tax laws and help taxpayers understand what the tax laws mean to them. For Lisa, providing timely and accurate information to taxpayers is paramount to helping them keep more of their money. More from Lisa Greene Lewis

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