Refundable Tax Credits and Free Tax Preparation - Tax Year 2009

What is a refundable tax credit?

A tax credit reduces the amount of taxes a taxpayer owes.  If a tax credit is refundable, when that credit exceeds the amount of taxes owed, the taxpayer will receive the remaining portion of the credit as a refund.  This means that qualifying taxpayers may receive a refund that is larger than what has been withheld from the year's paychecks.

What is the Earned Income Tax Credit (EITC)?

The earned EITC is a refundable tax credit available to working families making less than $48,279 and may be worth as much as $5,657.  The EITC is also available to working individuals making less than $13,440 and may be worth as much as $457.  Because it is a refundable credit, in many cases taxpayers who receive the EITC get a refund even if they had no tax obligation in a given year.  This can mean getting a refund of thousands of dollars.

How much money is the EITC?

• $6 to $5,657 if you have three or more qualified children and had an income of less than $43,279 ($48,279 if married and filing jointly).

• $5 to $5,028 if you have two qualified children and had an income of less than $40,295 ($45,295 if married and filing jointly).

• $4 to $3,043 if you have one qualified child and had an income of less than $35,463 ($40,463 if married and filing jointly).

• $1 to $457 if you have no qualified children and had an income of less than $13,440 ($18,440 if married and filing jointly).

What is the Child Tax Credit (CTC)?

The CTC is a tax credit worth up to $1,000 per child.  For all taxpayers who receive it, the CTC will reduce the amount of taxes owed.  For some tax payers, remaining CTC will become a refundable credit (as the Additional Child Tax Credit).

It is not too late to get the EITC for past years in which you qualified but did not claim it. The EITC, and other tax credits, can be claimed retroactively for up to 3 years.

• If you filed a tax return in a past year, but did not claim the EITC you qualify for, you can still claim it by filing an amended return up to 3 years later.

• If you did not file a tax return for a past year, you still can still claim the EITC and get a refund owed to you up to 3 years later.

Qualifying Children

In order to be counted for these tax credits, children must have lived with you for more than half of 2009 (or have been a dependant full-time student).

• For the EITC, children must be either under 19 during 2009, under 24 and a full-time student, or any age and permanently and totally disabled.

• For the CTC, children must be under 17 during 2009.

What if I am not a U.S. Citizen?

• For the EITC: the taxpayer, spouse, and any children claimed need a valid Social Security Number.

• For the CTC: either a Social Security Number or an Individual Taxpayer Identification Number (ITIN) is needed.

Free Alternatives to Traditional Tax Filing Options

• Do you want to file your tax return yourself?

• I-CAN! E-File is available to taxpayers for free at www.icanefile.org.

• IRS Free File allows free on-line federal income tax preparation and e-filing through a partnership agreement between the IRS and numerous members of the tax software industry.

Would you like someone to prepare your tax return for you?

• Volunteer Income Tax Assistance (VITA) sites help people fill out tax returns for free.  Trained community groups operate these VITA sites. For a site near you, call 1-800-829-1040.  See the spreadsheet of statewide locations.

• AARP Tax-Aide.  This program, in partnership with the IRS and AARP, offers free tax preparation to those ages 60 and older, and also to low- and moderate-income people under age 60.  To find an AARP Tax-Aide site near you, call (888) 227-7669 or visit the AARP Tax-Aide website to find a location near you.