Blog Action Day 2008: EITC
Wednesday, October 15, 2008
Over the years, lawmakers have used the tax code to do more than raise revenue. Tax policy frequently is social policy.
One such instance is the Earned Income Tax Credit, often referred to as the EITC (or Earned Income Credit/EIC). It was created more than 30 years ago to help reduce the tax burden on individuals and families who hold low-paying jobs.
The EITC helps offset some of the Social Security taxes that are withheld from eligible workers' paychecks. Even better, the EITC could help qualifying taxpayers receive refunds if they have no tax liability.
For the 2008 tax year, a worker supporting two or more children could claim a maximum credit of $4,824.
If the worker has only one dependent child, the credit could be as much as $2,917.
Childless workers also could qualify. These workers could collect up to $438 thanks to the EITC.
Income balancing act: In order to get those amounts back from Uncle Sam taxpayers must make some money but not so much that they exceed certain income limits.
To collect the maximum credit on 2008 returns, a single worker must earn no more than $7,160 if he or she has no children or $15,740 if the worker has any dependent children.
Married couples who file joint returns and are childless can make up to $10,180 and get the maximum credit or up to $18,749 if they are raising a family.
Earnings beyond those amounts trigger a reduction in the available EITC amount.
And once workers exceed income thresholds that are adjusted for inflation each year, they are not eligible for the EITC.
To claim any credit on a 2008 return, a single filer's adjusted gross income must be less than $12,880 if he or she has no children, $33,995 with one child and $38,646 with two or more kids.
Married couples filing jointly are allowed to earn $3,000 more in each category than their single counterparts and still claim at least a portion of the EITC.
But once the workers make over the applicable family-size limit, they can't clam the EITC.
Complicated computations, considerations: In 2006, the last tax year for which data are complete, 22.4 million taxpayers claimed the EITC, resulting in almost $44 billion in tax breaks.
But the IRS says that those figures represent only a portion of EITC-eligible taxpayers. Many individuals each year do not claim the credit even though they meet the guidelines.
The reason for ignoring this tax break? The EITC is complicated to calculate, a particular problem for low-wage earners who cannot afford to hire professional tax help.
In addition to the credit amount calculations, many EITC eligible taxpayers also run into trouble in determining a child's eligibility.
A child's age, relationship to the taxpayers and where that youngster lived during the year must be taken into account.
The IRS has an online EITC Assistant which can help taxpayers see if they are eligible and, if so, how much credit they can expect. The 2008 figures have not yet been put into the online calculator, so you might want to bookmark the page and check back periodically.
This special EITC Web page also offers additional EITC information and links.
Individuals who want a more personal touch can get no-cost help in deciphering and filing for the EITC via the IRS' Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) programs, as well as through AARP's Tax-Aide.
And when a taxpayer gets into trouble with the IRS because of an improperly filed EITC claim, help is available at low-income tax clinics across the country. This clickable map can help you find the nearest clinic.
If you qualify for the EITC, be sure to claim it. If you know someone who might benefit from it, please make sure that they know about the tax break.
And if you want to help others file for the EITC, contact VITA at 1-800-829-1040 or TCE at 1-800-829-1040 to volunteer. You can locate the nearest AARP Tax-Aide site by calling 1-888-227-7669 or visiting AARP's Web site.
Blog Action Day 2008: This post is part of the second annual Blog Action Day, focusing this year on poverty.
Blog Action Day 2008 Poverty from Blog Action Day on Vimeo.
Almost 11,000 bloggers worldwide already have spoken about some aspect of this pervasive and troubling problem. And the number will keep growing as other sites publish their Blog Action Day posts.
Please take a moment to check out at least a few of the other Blog Action Day participants.
The power of blogging can change things. Laws and otherwise.
Posted by: income tax preparation fees | Friday, October 15, 2010 at 04:55 PM
Anali and Bill,
Thanks for your kind words.
This is a good law, but it is way too complicated. I get particulalry upset by folks who use it as the basis for scams.
And extra thanks to you Bill for helping with the AARP program. These kind of efforts are critical to making our system work for everyone.
Posted by: Kay | Wednesday, October 15, 2008 at 03:37 PM
Posted by: Anali | Wednesday, October 15, 2008 at 01:42 PM
Excellent BAD08 post highlighting the EITC and how it can be used to help those in poverty with extra money in the form of a larger refund.
I'm an instructor in my local AARP Tax-Aide district and I'm happy to see the program linked in your post.
Tax-Aide, VITA, and other similar programs are truly worthy causes and I'm happy to play a small part in helping millions receive EITC money for which they qualify, yet may not regularly receive due to the complicated nature of properly filing a tax return.
Posted by: Bill | Wednesday, October 15, 2008 at 12:40 PM