According to the IRS, roughly 20% of Americans who qualify, do not claim Earned Income Tax Credit (EITC). Every year that translates to billions of dollars that are left unclaimed.
The EITC is a refundable tax credit that reduces your tax liability. If the EITC you qualify for is greater than the amount you owe in taxes, you get the difference as a refund. You could potentially qualify for it even if you don’t owe any taxes or are required to file.
Many American do not file the tax returns and miss out on this credit. And many are unaware of this benefit available to them. The IRS even goes as far as sending letters informing taxpayers that they may qualify for the credit. Most of us are scared of anything we get from the IRS, but these notices – CP09 and CP27 – shouldn’t be ignored. They typically outline the steps to take to verify if you qualify and how to claim the credit.
In order to qualify for EITC, you need to meet the following requirements:
- You must have earned income from a job
- You cannot make more than a certain amount
In order to claim EITC you have to file a tax return. Here are some tips on how to do it for free.
The amount of EITC can vary significantly for taxpayers. The maximum credit is $6,557 for filers with three or more qualifying children. On average, taxpayers who qualify for the EITC receive close to $2,500
The amount of the credit is based on how much you earned in the fiscal year. Furthermore, life situations, such as filing status (Single, Married, Head of Household, etc) or family size (number of qualifying children) will impact the total amount of EITC.
For additional information on EITC, visit the IRS website. One very neat feature you find there is the EITC Assistant. It is a brief questionnaire that helps you determine your eligibility for the EITC. The Assistant can walk you through tax years 2019, 2018, and 2017. So, there is still time to claim the EITC for up to three years. The Assistant helps estimate the amount of EITC you receive, assuming you qualify. The whole exercise takes as little as 5 minutes, but will take a little longer if you have to gather your records. I think it’s still worth going through the questions. It doesn’t cost anything and may help you get an unexpected monetary boost.