Uncategorized The Earned Income Tax Credit: Do you qualify?

The Earned Income Tax Credit: Do you qualify?

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The IRS estimates that 20-25% of qualified Americans do not claim the EITC. In Indiana, an estimated 15% or more of qualifying Hoosiers do not apply for the credit.

In 2009 over 24 million people received nearly $49 billion in federal Earned Income Tax Credits nationwide. The federal EITC benefitted 493,000 Indiana residents, with an average credit amount of $1,991.

Half of all families with children receive the EITC at some point. – Center on Budget and Policy Priorities

Earned Income Tax Credits (EITC) are federal and state tax credits designed to offset some of the tax burden of low and moderate income individuals and families. Indiana residents who qualify to claim EITC on a federal income tax return may also be eligible for a similar credit on the state income tax return. The amount of EITC depends on a recipient’s income, marital status, and number of children.

Research indicates that families use the EITC to pay for necessities, repair homes, maintain vehicles that are needed to commute to work, and in some cases, obtain additional education or training to boost their employability and earning power. – Center on Budget and Policy Priorities

Effective January 1, 2009, the Indiana General Assembly increased the state’s EITC from 6% to 9% of the federal credit. Therefore, the Indiana credit amount is equal to 9% of the amount of the federal credit that an individual is eligible to receive and claim for the taxable year.

Required qualifications

To qualify for the EITC, taxpayers must file a tax return, even if they are not required based on income, and meet ONE of the following income qualifications for 2009:

In addition to meeting one of the income qualifications, taxpayers must meet ALL of the following requirements:

  • Must have a valid Social Security Number
  • You must have earned income from employment or from self-employment
  • Your filing status cannot be married, filing separately
  • You must be a U.S. citizen or resident alien all year, or a nonresident alien married to a U.S. citizen or resident alien and filing a joint return
  • If you do not have a qualifying child, you must:
  • be age 25 but under 65 at the end of the year,
  • live in the United States for more than half the year, and
  • not qualify as a dependent of another person
  • Cannot file Form 2555 or 2555-EZ (related to foreign earn income)

More qualification information is available at IRS.gov.

Free tax preparation software at IRS.gov

All taxpayers making less than $57,000 can visit IRS.gov and use the industry’s top tax preparation software for free. Users get the step-by-step help they need to prepare, complete and file federal tax returns online – at no cost. The program is made possible through a partnership between the IRS and the Free File Alliance – a group of tax software providers.

Additional resources regarding the EITC:

IRS: EITC Central

IRS: EITC Assistant

IRS: Estimate your EITC credit

Indiana Dept. of Revenue: Information on other Indiana income tax credits

Indiana EITC Tax Form: Schedule IN-EIC  (PDF)

Center on Budget and Policy Priorities: Policy Basics – The Earned Income Tax Credit

Indiana Institute for Working Families: EITC Policy Brief, Jan 2010 (PDF)