Attention workers!
Did you EARN this income-tax relief?
By Herb Drill
WASHINGTON - This, unfortunately, is news suited for the disabled, who manage to be underpaid - if they have a job at all.
The Internal Revenue Service contends millions of Americans “forgo critical tax relief each year by failing to claim the Earned Income Tax Credit (EITC),” a federal tax credit for individuals who work but don’t earn high incomes. Taxpayers who qualify and claim the credit could pay less federal tax, pay no tax., or even get a tax REFUND.
In 2004, an estimated 21 million taxpayers received approximately $37.5 billion in EITC; however, the IRS (www.irs.gov/newsroom/index.html) estimates 25% of people who qualify don’t claim the credit. 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.
EITC is based on the amount of earned income and the number of qualifying children in the household. If you have children, they must meet the relationship, age, and residency requirements. You must file a tax return to claim the credit.
If you were employed for at least part of 2004, you may be eligible for the EITC based on these general requirements:
· You earned less than $11,490 ($12,490 if married filing jointly), didn’t have any qualifying children, and were at least 25 but under 65, or
· You earned less than $30,338 ($31,338 if married filing jointly) and have one qualifying child, or
· You earned less than $34,458 ($35,458 if married filing jointly) and have more than one qualifying child.
There's a lot to know about qualifying for EITC, and the EITC Assistant - a new tool on the IRS Web site - will help take the guesswork out of the eligibility rules and make this determination easier. Answer a few simple questions about yourself, your children, your living situation, and your income to find out if you’re likely to qualify for the EITC. You see results of your responses on your computer screen.
Taxpayers, tax professionals, employers, and community and public service organizations are encouraged to use the EITC Assistant on www.IRS.gov, which is available in English and Spanish. Information about EITC rules is available in Publication 596, Earned Income Credit. It contains eligibility criteria and instructions for claiming the credit. Copies are available in English and Spanish on www.IRS.gov, or call 1-800-829-3676.
You may be able to get EITC payments in advance - in each paycheck - rather than wait until tax time to claim the credit. To qualify for advance payments, you must work and receive taxable wages, and have at least one qualifying child for 2005. If you would like to participate for 2005, give your employer a Form W-5, Earned Income Credit Advance Payment Certificate, and your employer will be able to include part of the credit regularly in your paycheck.
If you received advance EITC payments in 2004, you must file an income-tax return to report the payments. Report the amount on line 60 (Form 1040) or line 37 (Form 1040A). Your W-2 form will show the amount of your advance EITC payments in box 9. You can’t use a Form 1040-EZ to report advance payments.
You may be able to get free assistance in preparing your federal tax return from one of the local volunteer tax assistance programs, such as Volunteer Income Tax Assistance (VITA), Tax Counseling for the Elderly (TCE), or the Military VITA Program for armed forces members and families. To obtain the location, dates, and hours of the volunteer site closest to you, call the IRS toll-free at 1-800-829-1040.
Also, you may be one of millions of taxpayers who will be able to prepare and file their 2004 federal tax returns electronically - for free. The IRS and the Free File Alliance LLC, a private sector consortium of tax software companies, formed a partnership to help qualifying taxpayers prepare and file electronically their federal tax returns for free. See the Free File home page for more information.
Here are some helpful links:
· EITC Assistant - www.irs.gov/individuals/article/0,,id=130102,00.html
· Earned Income Tax Credit - www.irs.gov/individuals/article/0,,id=96456,00.html
· Publication 596, Earned Income Credit (EIC) - www.irs.gov/pub/irs-pdf/p596.pdf
· Free File - www.irs.gov/efile/article/0,,id=118986,00.html
· Tax Topic 601, Earned Income Credit - www.irs.gov/taxtopics/tc601.html
· AARP Tax-Aide - www.irs.gov/app/scripts/exit.jsp?dest=http%3A%2F%2Fwww.aarp.org%2Ftaxaide%2F.