2010-02-04 / Features

Kick Off Tax Season On “Earned Income Tax Credit Day”

The IRS and the Treasury Department marked Friday, January 29, as Earned Income Tax Credit Day (EITC) Awareness Day as tax partners nationwide worked to highlight the availability of this important tax credit.

EITC, which is in its 35th year, is one of the federal government’s largest benefit programs for working families and individuals. Last year, nearly 24 million people received $50 billion in benefits. The average credit was more than $2,000.

Historically, one in four eligible taxpayers fails to claim the credit, which is why the IRA and its free tax preparation partners host an annual EITC Awareness Day. Typically, people who fail to claim the credit include workers without qualifying children, people whose earned income falls below the threshold required to file a tax return, farmers, rural residents, people with disabilities and nontraditional families such as grandparents raising grandchildren. People must file a tax return to claim the credit.

Eligibility for EITC depends on earned income and family size, among other tests. However, single people and childless workers also are eligible, although for smaller amounts. For tax years 2009 and 2010, the American Recovery and Reinvestment Act created a new category for families with three or more children.

Earned income and adjusted gross income (AGI) for individuals must each be less than

$43,279 ($48,279 married filing jointly) with three more qualifying children

$40,295 ($45,295) married filing jointly) with two qualifying children

$35,463 ($40,463 married filing jointly) with one qualifying children

$13,440 ($18,440 married filing jointly) with no qualifying children

The maximum credit for tax year 2009 is

$5,657 with three or more qualifying children

$5,028 with two qualifying children

$3,043 with one qualifying child

$457 with no qualifying children

The maximum amount of investment income is $3,100 for tax year 2009. For families, there also are certain requirements for child residency and relationship that must be met. Additional eligibility information is available through IRS.gov/EITC.

Another new provision adds to the definition of a “qualifying child.” The child must be younger than the person claiming the child unless the child is totally and permanently disabled any time during the year. The child cannot have filed a joint return other than to claim a refund. Also new for 2009, if a qualifying child can be claimed by both a parent and another person, the other person must have an AGI higher than the parent in order to claim the child for EITC purposes.

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