The earned income tax credit was established in 1975 to combat trends that have led to a high child poverty rate, and boosting the incomes of low and moderate income workers. Another goal of the credit is to help welfare recipients make the transition back to work. The credit is available to employees who meet certain criteria or qualifications.
It is a refundable credit that may be available to you if you are a lower income worker and meet other certain criteria such as your adjusted gross income is under a specific limit set forth by the IRS. Earned income tax credit is by definition a credit and therefore not considered income by the government. It is a unique credit which lower income workers can deduct on their tax return every year.
Even if you had no tax withheld or do not owe any tax to the IRS on your tax return, you should still try to get the credit. Some people might still get some money back because the earned income credit is a refundable credit. However, if you fraudulently claim the earned income credit it is disallowed for ten years from the most recent tax year from which it is found by the IRS to be fraudulent.
If your adjusted gross income is greater than what you made your earned income credit is calculated with your adjusted gross income and compared to the amount you would have received with your wages. Income limitations eligibility for the credit is determined by your families size, marital status and income. This credit is for full time, part time, single or married workers raising at least one qualifying child at home. Some childless workers can obtain the credit too. Your accountant will inform you if you can claim it.
For tax year 2007, the earned income credit is allowed if your earned and adjusted gross income is less than $12,590 ($14,590 for married filing jointly), you have no children and you are 25-64 years of age. This is calculated as 20 percent of your federal wages, minus your state income tax liability. For some workers a similar program is also available on a state level. Some states such as Wisconsin, Illinois, Michigan, and New York have their own programs. In New York City for instance, if your wages are more than the amount of the New York City tax that you owe, you can claim a refund.
The earned income tax credit is exempt under the laws of a handful of states, but there is no federal exemption that preserves the earned income benefit for the people it was intended to assist. If the credit is greater than your tax obligation then you will receive the additional amount as a refund.
The credit does not include these as income when qualifying: interest and dividends( as long as its below $2550), social security, welfare benefits, pensions, or annuities, veterans benefits, Workers compensation, alimony, Child support, unemployment compensation, taxable scholarships or fellowship grants. Even though all of the above are considered taxable income, the IRS only includes what you report on your W2 for the earned income credit.
A huge thank you to our sponsor NW Window Tinting! If you are looking for one of the best places to get window tint Vancouver WA they are the place to call!