What is the earned income tax credit, and how do I know if I’m eligible to claim it?
The IRS estimates that four out of five eligible taxpayers actually claim this credit, but many still are either unaware of their eligibility or don’t know how to claim it.
For example, some families, including those in the military and those raising children with disabilities, may not realize there are special rules that could help them qualify.
To qualify for Earned Income Tax Credit or EITC, you must have earned income from employment, self-employment or another source, have very little in investments and meet certain rules.
In addition, you must either meet the additional rules for Workers without a Qualifying Child or have a child that meets all the Qualifying Child Rules for you.
Rules for Workers without a Qualifying Child:
• You—and your spouse, if filing a joint return—must have lived in the United States for more than half the tax year
• Either you or your spouse, if filing a joint return, must be at least age 25 but under age 65
• You—or your spouse, if filing a joint return—cannot qualify as a dependent of another person.
Rules for Workers with a Qualifying Child Rules:
• Your child must have a valid Social Security Number and must pass all of the following tests to be your qualifying child for EITC:
1. Relationship. Your son, daughter, adopted child, stepchild, foster child or a descendent of any of them such as your grandchild, brother, sister, half sibling, step sibling or a descendant of any of them such as a niece or nephew
2. Age. At the end of the filing year, your child was: younger than you—or your spouse if you file a joint return—and younger than 19, or younger than 24 and a full-time student.
Any age if permanently and totally disabled.
3. Residency. Child must live with you—or your spouse if you file a joint return—in the United States for more than half of the year.
4. Joint Return. The child cannot file a joint return for the year, unless the child and the child’s spouse did not have a filing requirement and filed only to claim a refund.
If more than one person is qualified to claim the refund using the same child, the tiebreaker rules will be applied to determine who is allowed to claim the credit.
Under the Tiebreaker Rule, the Child is Treated as a Qualifying Child Only By:
• The parents, if they file a joint return;.
• The parent, if only one of the persons is the child’s parent;
• The parent with whom the child lived the longest during the tax year, if two of the persons are the child’s parent and they do not file a joint return together;
• The parent with the highest adjusted gross income (AGI) if the child lived with each parent for the same amount of time during the tax years, and they do not file a joint return together;
• The person with the highest AGI, if no parent can claim the child as a qualifying child; or
• A person with the higher AGI than any parent who can claim the child as a qualifying child but does not.
The federal form you will need is Schedule EIC, which along with more information can be found on the IRS website: irs.gov/individuals/article/0,,id=96406,00.html.
New York State’s EITC is based on 30 percent of the federal credit and reduced by the smaller of the household credit or the NYS income tax. New York uses form IT-215 and additional information on the NYS EITC can be found at: www.tax.ny.gov.
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