Huron Hometown News

There have been so many tax changes and IRS policy changes that it is hard for me to decide where I am going with this column each week. Earned Income Tax Credit (EITC or EIC) affects many of our clients at this time of the tax season, and with this economy many more taxpayers will qualify for EIC this year. Earned Income Tax Credit is a refundable tax credit designed to assist low-income workers, and to offset the burden of U.S. payroll taxes, usually meaning more money in their pockets. It reduces the amount of tax owed, and may also provide a refund. The basic requirements for receiving EIC are: Must have a valid social security number; Must have earned income from employment or from self-employment; Cannot be filing as married filing separately; Must be a US citizen or resident alien; Cannot be a qualifying child of another person; If taxpayer does not have a qualifying child, the taxpayer must: Be age 25, but under 65 at the end of the year; Live in the US for more than half the year; Not qualify as a dependent of another person. Maximum income caps apply. This government assistance program is designed to help the individual just entering the job market by paying them to work. The big picture is like a bell curve. You work a little bit you get a little bit. You work more you get more. When you reach a certain point your EIC stays the same for a while. After that as you work more you get less until your income fazes you out of the program. For example, if you are single between 25 and 65 you might qualify for EIC when you have earned at least one dollar and you stop getting EIC when you earn $13,400. You get the most EIC between $6,000 and $7,500. If you are married you can earn more than $18,350 before you faze out. You also can earn more and receive more if you have a child and more if there are two qualifying children; and this year three children will increase your EIC. There are several rules for qualifying a child: residency, relationship, age, and joint filing are the main rules. As you can imagine, this area of the tax code is very susceptible to fraud and many questions need to be answered so getting qualified help is strongly recommended.