About EITC
The Earned Income Tax Credit (EITC) is a credit for people who do
not earn high incomes. EITC can reduce taxes, and increase a
refund. Workers keep more of what they earn. Income and family size determine the amount of the EITC,
which is
adjusted for inflation each year.
 
Tax Year 2008 Income Thresholds and
Range of EITC
| Number of Qualifying Children |
For Single/Head of Household,
Income Must be Less Than |
For Married Filing Jointly, Income
Must be Less Than |
EITC Range |
| No Child |
$12,880 |
$15,880 |
$2 to $438 |
| One Child |
$33,995 |
$36,995 |
$9 to $2,917 |
| Two or More Children |
$38,646 |
$$41,646 |
$10 to $4,824 |
from http://www.eitc.irs.gov/central/abouteitc/ranges/
Basic Qualifications
All workers claiming the EITC must:
- Be U.S. Citizen or resident
alien for the entire year
- Have valid Social Security
number
- Have earned income
- Not file as “married filing
separate”
- Not file Form 2555 or Form
2555-EZ (related to Foreign Earned Income)
- Meet the investment income
limitation ($2,950 for 2008)
- Not be the qualifying child
of another person
Workers without a Qualifying Child Must:
- Have lived in the United
States for more than half of the tax year
- Be at least age 25 but not
age 65 or older
- Cannot qualify as the
dependent of another person
To File with a "Qualifying Child", the Child Must Pass All of
the Following Tests:
- Relationship : A son or daughter
(natural or adopted), Stepchild, or Foster child OR
brother, sister,
stepbrother, stepsister or a descendant of any of them
- Age : At the end of the filing
year the child must be younger than 19, OR younger than 24 and
a full-time student, OR permanently and totally
disabled
- Residency : Child must live with
taxpayer in the United States for more than half the year
Note: Only one person can claim
the same child for the EITC. If more than one person can claim the
child for EITC, the persons choose who claims the child but if more
than one claims the child, IRS applies the
tie-breaker rules.
Tie Breaker Rules
If more than one person can claim
a child as a qualifying child, they can choose the one who will claim the child. If
more than one person claims the child, the IRS will choose
according to
following rules. Note that it is not first to file that
gets to claim the child:
|
Rule |
Person claiming child |
| If only one person is the child's
parent |
parent |
| If two people are parents of the
child and do not file a joint return together |
parent with whom child lived longest |
| If two people are parents of the
child and do not file a joint return together, and the child lived
with each parent the same amount of time during the year |
parent with highest AGI |
| If none of the people are the child’s
parents |
person with highest AGI |
Advance EITC
EITC for a year is received as a lump sum after income tax filing after the
year is over. Would it be possible to receive the EITC a little bit at a
time during the current year?
The answer is YES! It is the Advance EITC!
It allows some workers to receive EITC in installments throughout the year.
Those who qualify can register in January each year to receive part of the
credit each paycheck, which adds to the take-home pay.
The maximum amount of EITC paid in advance is 60% of maximum credit for a worker
with one qualifying child. For 2009, the amount is $1,825. To qualify for
Advance EITC, taxpayers must:
- Expect 2009 income to be less than $35,463 ($38,583 if filing joint
return)
- Have at least one qualifying child
- Qualify for EITC
If you meet these requirements, Complete Form W-5, Earned Income Credit Advance Payment Certificate, and give
the
bottom part to employer.
With this authorization, the employer will include the amount in their
paychecks.
 
|
