The Earned Income Tax Credit May Save Thousands for Taxpayers

Many people will qualify for the the Earned Income Tax Credit for the first time this year, because their income declined, which might have resulted from pay cuts or unfortunately, a loss of a job, or reduced employer workload. It may also be applicable to those individuals who changed their marital status or had more children during the year.

If your family has three or more children you may be entitled to a receive a larger credit this year as compared to the prior year. The reason for this increase is a direct result of the American Recovery and Reinvestment Act, which temporarily provides an increase in the credit for taxpayers with three or more qualifying children. This new legislation was signed in 2009 and consequently, the changes apply to your 2009 income tax return. The maximum credit for this category is $5,657.

By filing your federal tax returns is the only way that eligible taxpayers can receive the Earned Income Tax Credit . Tax Tip- If you are not required to file an income tax return, because you tax liability is zero, you should consider filing a tax return this year to claim this credit, providing you are eligible for Earned Income Tax Credit.

The Amounts of the Earned Income Tax Credit – The following indicates the levels of tax credit that may be available to you. Providing you are married with 3 children with an income from $12,570-$21,420 you may be eligible for the maximum credit of $5,657. The maximum credit for 2009 is:(i)$5,657 with three or more qualifying children (ii)5,028 with two qualifying children (iii)$3,043 with one qualifying child and (iv)$457 with no qualifying children.

The Internal Revenue Service has estimated that 20% to 25% of additional taxpayers may qualify for EITC but miss out on this credit. Tax Tip- This refundable tax concept is important and is worth repeating, especially if you prepare your own tax return.The EITC is a refundable credit, i.e., therefore, if the amount of the EITC reduces your taxable income below zero you are eligible for a tax refund for that amount.

This article is not intended to provide legal or accounting advice. This information is complex and you can find out more about the EITC directly from the Internal Revenue Service by asking for IRS publication 596. Because the tax laws are complex, change constantly and each situation is unique, the reader is advised to do his or her own due diligence and consult with professionals in these areas.

Learn more about how we can help determine if you are eligible for the Earned Income Tax Credit and other available income tax credits and about our competitively priced paperless approach to tax preparation at affordable prices. Sandor(Sandy) E. Lenner,C.P.A.-M.B.A. has been providing business and accounting services for over 35 years and works part-time at his wife’s CPA firm.

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