Tax Time Questions by Independent Tax Preparer Deborah Ritz

What is the earned income tax credit and do I qualify?

What is the earned income tax credit?

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.

A qualifying child cannot be used by more than one person.

If a child qualifies for more than one person and one of the persons is a parent or parents, the non-parent can claim the child only if their AGI is higher than the parent(s).

If the child qualifies another relative and the parent AGI rules do not apply, the taxpayers choose.

If more than one person claims the same child, IRS applies the tiebreaker rules.

The federal form you will need is Schedule EIC, which along with more information can be found on the IRS website: http://www.irs.gov/individuals/article/0,,id=96406,00.html

New York State’s EITC is based on 30% 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: http://www.tax.ny.gov/pdf/201/inc/it215i_2011.pdf

Questions for Deborah Ritz can be e-mailed to WeeklyADK@yahoo.com

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