It’s tax time in Indiana. Do you make less than $54,000 a year? If so, you may be eligible to receive one of the more generous tax credits when completing your taxes this year. One of the more overlooked tax credits for working families is the Earned Income Tax Credit (EITC), a federal tax break designed to assist low to moderate-income households.
Many Hoosiers may be eligible but not know it for a number of reasons: the rules surrounding it are complex, people may not know to apply for it and eligibility may change year by year. The IRS suggests that anyone earning less than $54,000 a year look into their eligibility each tax season. The IRS estimates that 26 million people received about $65.6 billion under this tax credit last year. The average amount received was more than $2,400 but it can be worth as much as $6,000.
The fact remains, one out of five workers who are eligible for the EITC do not take advantage of this tax credit.
The credit caters to low-income households, but income thresholds vary on many factors such as number of dependents and other factors. There are some special populations that might not realize they are eligible. The IRS says this includes people living in rural areas, the self-employed, disabled taxpayers, Native Americans, grandparents raising grandchildren and those whose earnings have recently declined, such as the recently divorced or unemployed.
To qualify, a taxpayer must have earned income from a job, self-employment or even minimal disability payments. They must also meet the list of requirements provided as well as file federal taxes.
While having a child does increase the amount you may get back, there are also special rules for members of the military, members of the clergy, individuals receiving disability payments and people affected by disasters. People with disabilities are often concerned that a tax refund will affect their eligibility for public benefits, such as Medicaid or food stamps. But the law is clear that tax refunds, including refunds from tax credits such as the EITC, are not counted as income for purposes of determining eligibility for benefits.
We suggest that if you earn less than $54,000 a year, you should take a look at the requirements above, as well as use the EITC Assistant found here>>
Taxpayers’ lives change constantly, and if you are not eligible in one year, you may be able to claim the EITC the following year.
If you think you may have overlooked it, it may not be too late. The IRS allows taxpayers to file or amend a return up to three years after the original due date, so a tax professional may be able to review prior returns to deem eligibility and help file an amendment as needed. Due to the IRS’s efforts to reduce fraud, when claiming the EITC, your return may cause a delay in the disbursement of your refund.
Additionally, if you qualify for the Federal EITC, you may also be eligible for a similar credit from your state or local government. Twenty-five states, plus local municipalities offer residents an EITC for 2016. For more information on the Indiana EITC and other tax credits available to Hoosiers, click here>>