Earned Income Tax Credit
by: Low Income Taxpayer Clinic (LITC)
What Is The Earned Income Tax Credit?
The Earned Income Tax Credit (EITC) is a tax benefit for working people who earn low to moderate income. In 2005, depending on your income, you may qualify for a benefit of up to $399 if you have no children, $2,662 if you have one child and up to $4,400 if you have two or more children.
Who May Claim The EITC?
Any person who worked full or part-time during the year and meets certain rules may qualify for the EITC.
How Do I Qualify For The EITC?
To qualify for the EITC, you must meet the following factors:
- Earned Income You must have earned income from wages, tips, self-employment or some long-term disability payments paid by your employer. Non-earned income items include: unemployment benefits; child support; Social Security benefits; pensions; alimony; welfare benefits; food stamps; job training benefits; nontaxable employee pay and interest. If your only income is from non-earned income, you will not qualify for the EITC.
- Filing Status Your filing status on your tax return must be single, married filing jointly or head of household. If your filing status is married filing separately, you will not qualify for the EITC.
- Investment Income Your investment income (interest, dividends and rents) cannot be more than $2,700 (2005).
- Legal Status You must be a U. S. citizen or resident alien (you do not have to be a legal resident).
- Social Security Number You, your spouse and your children must have valid Social Security numbers.
- Qualifying Child If you are claiming a child for the EITC, your child must meet the relationship, age and residency tests.
Relationship Test
A qualifying child includes your son, daughter, adopted child, stepchild, grandchild, and a great-grandchild. It also includes your brother, sister, stepbrother, stepsister, niece, nephew or eligible foster child as long as you care for them as you would your own child.
Age Test
Your qualifying child must be under age 19 on December 31st or a full-time student under age 24. To be a full-time student, your child must be enrolled in school full-time for at least 5 months of the year. You can get the EITC for children of any age who are totally and permanently disabled.
Resident Test
The qualifying child must live with you in the U.S. for more than half the year.
What If My Child Is The Qualifying Child Of Someone Else?
You can choose which parent can claim the EITC. If both parents try to claim the same child for the EITC, then the parent with whom the child resided the longest during the year will be allowed to claim the EITC.
If the child lived with both parents equally, then the parent with the highest adjusted gross income will be allowed to claim the EITC.
What If I Think I Should Have Received The EITC In Prior Years, But Did Not Ask For It On My Tax Return?
If you qualified for the EITC in prior years, but did not claim it, you may go back three years to either file or amend your tax return and claim the EITC.
Do I Have To Wait To File Taxes Before I Can Claim The EITC?
No. If you earn less than a certain amount, have at least one qualifying child and can claim the EITC, your employer can advance your EITC in each paycheck.
You can receive the advanced EITC by filling out a W-5 form and giving it to your employer. You must file a new W-5 form each year, to continue to receive the advanced EITC.
Will The EITC Affect My Public Benefits?
The EITC or advanced EITC will not affect your eligibility or amount for certain public benefits, such as food stamps, low-income housing, welfare, or SSI, as long as you spend the EITC within a certain time period. If you are denied public benefits or your amount decreases because of the EITC, you should call the MLSA hotline.
What If The IRS Denies My EITC Claim?
You should appeal the IRS decision if you feel that you qualify for the EITC. To appeal, you must prepare a written statement explaining why you are qualified, and attach documents that support your claim. If you do not appeal the IRS decision, you may not be able to claim the EITC for the next two years.
Tax Information and Resources
The following resources can provide you with more tax information and/or assistance with filing your taxes:
- Volunteer Income Tax Assistance (VITA): 1-800-829-1040
- I-CAN e-filing allows you to file your taxes and apply for the Earned Income Credit for free at: http://www.icanefile.org
- IRS Tax Information for Individuals: http://www.irs.gov/individuals/index.html
- MLSA Low Income Taxpayer Clinic gives low-income taxpayers free legal assistance on federal tax matters year round: (406) 543-8343 or (800) 999-4941 or (800) 666-6899 or (800) 926-3144.
Revised 1/06
The clinic listed herein is partially funded through matching grants provided by the Internal Revenue Service pursuant to the Internal Revenue Service Restructuring and Reform Act of 1998. The partial funding by the IRS does not imply that the clinics have a preferential relationship with the IRS. The decision of whether to use these clinics is your own and their use will not affect your rights before the IRS.
Call the MLSA HelpLine for legal assistance:
(800) 666-6899
Low Income Taxpayer Clinic
304 North Higgins Avenue
Missoula, Montana 59802
(406) 543-8343
(800) 686-4574
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