MAIN Your Money Taxes

Is This Tax Credit for You?

Far too many Americans stillforgo an important tax relief resource each year - when they fail to claim the Earned Income Tax Credit (EITC) - a federal tax credit for people who do not earn high incomes.

Those who qualify could pay less federal tax, pay no tax or even get a tax refund. That is, if they claim the credit on their annual tax forms. In 2004, it was estimated that 21 million taxpayers who did claim the credit received more than $37 billion in EITC relief.

"The EITC helps hardworking taxpayers, yet each year an estimated 25 percent of people who qualify don't claim the credit," says David R. Williams, Director, Earned Income Tax Credit at the Internal Revenue Service. "At the same time, there are millions of Americans who have claimed the credit in error, many of whom simply don't understand the criteria. That's why the IRS is working to make it easier for taxpayers to understand whether they are eligible."

To claim the credit, you do not need to have children. If you have children, they must meet the relationship, age and residency requirements to claim the credit. If you were employed for at least part of the year, you may be eligible for the EITC based on these general requirements:

* You earned less than $12,490, did not have any qualifying children and were at least age 25 but under age 65 on Dec. 31 of the tax year in which you are filing.

* You earned less than $31,338 and have one qualifying child

* You earned less than $35,458 and have more than one qualifying child

Easy Ways to Determine Whether You Qualify

There's a lot to know about qualifying for EITC, but the most important thing to know is that help is available. Point your browser to www.irs.gov/eitc to find the easy EITC Assistant. By answering questions online about yourself, your children, your living situation and your income, you'll quickly find out if you are likely to qualify for the EITC. This tool is also available in Spanish.

The IRS also offers other resources to help you understand the EITC rules. IRS Publication 596, Earned Income Credit, contains eligibility criteria and instructions for claiming the tax credit. Copies of the publication are available in English and Spanish and can be found online or by calling 1-800-TAXFORM (1-800-829-3676). Or simply talk to your tax professional for more information.

Tax Preparation Assistance

If you are a qualified taxpayer, you can receive free assistance in preparing your federal tax return. Volunteer Income Tax Assistance (VITA) or Tax Counseling for the Elderly (TCE) sites, operated by trained volunteers, are generally located at community and neighborhood centers, libraries, schools, shopping malls and other convenient locations.

In addition, you may qualify to have your tax return filed electronically for free. Electronic filing enables you to receive your refund faster. Eligibility requirements are available at www.irs.gov in the Free File section.

Source : ARA Content