Search      Tips on Searching Find Legal Help On Taxes Related Resources The Low-Income Taxpayer Clinic By: Iowa Legal Aid Claim All the Tax Credits You Earned: What the Earned Income Credit Can Do for You at Tax Time! By: Iowa Legal Aid My Spouse Lied to the IRS and I Got the Bill! By: Iowa Legal Aid more...

Iowa's Earned Income Tax Credit becomes refundable!

For several years, Iowa taxpayers could get a state tax credit equal to 6.5% of the Federal Earned Income Tax Credit (EIC). The state credit was not refundable. This meant the credit could reduce the taxes you owed to the state of Iowa, but the state kept any leftover credit.

The Iowa Earned Income Tax Credit in 2007 will be 7% of the federal EIC. The credit will also be refundable. Let's look at an example of how this can work.

Example:  You qualify for $2,000 in the federal EIC. When you file your state of Iowa Tax return, you will enter a $140 credit on your state return. This is 7% of the $2,000 federal EIC. Your total tax from the tax tables is $62 based upon your taxable income. You have two personal credits for yourself - as you are filing head of household, and one personal credit for your child. Altogether, you have $100 in personal credits. These credits reduce the amount of tax you owe to less than zero.($62 - $100 = -$38, so you owe no tax.) Because the personal credits cancel out any taxes you owe, you will receive the entire state Earned Income Tax Credit of $140 in your refund.

Now is the time to settle up with the State of Iowa!

The state of Iowa is offering tax amnesty for taxes that were due and owing on or before December 31, 2006. You can apply for amnesty between September 4, 2007 and October 31, 2007. You can get details and access the forms to apply at http://www.iowataxamnesty.gov/ 
To get amnesty, you have to pay the tax that is due plus one-half of the interest that is due. If you pay the debt plus half the interest, the state of Iowa will forgive any other interest or penalties that are due for the same tax debt. The state will not pursue additional civil or criminal charges for tax debts for which you are granted tax amnesty.

Who isn't eligible? Amnesty is NOT available to anyone currently under criminal investigation or currently involved in a criminal court case involving taxes owed to the State of Iowa.

The state of Iowa is going to be stepping up enforcement and collection of tax debts so this tax amnesty opportunity is a good time to get these matters settled!

For details, or if you need help with either a state or federal tax problem, please call Iowa Legal Aid's Low-Income Taxpayer Clinic. Call 1-800-532-1275 to find out which Iowa Legal Aid office serves your county. Persons speaking Spanish should call 1-800-272-0008.

How Much Could Taxpayers Who Applied Get from the Earned Income Credit in Tax Year 2006?

• Families with one child who earned less than $32,001 (or less than $34,001 for married workers) were eligible for a credit of up to $2,747.
• Families with two or more children who earned less than $36,348 in 2006 (or less than $38,348 for married workers) were eligible for a credit of up to $4,536.
• Workers without a qualifying child who earned less than $12,120 in 2006 (or less than $14,120 for married workers) were eligible for a credit of up to $412.