Posted by Pat Raskob

Some Myths About the Earned Income Tax Credit (EITC)

Some Myths About the Earned Income Tax Credit (EITC)

The EITC is an important tax credit directed at millions of families across the US. It is one of the most substantial tax credits, making it important for people to access the credit and see if they qualify. Boosting awareness about EITC is crucial, and Uncle Sam is willing to encourage the efforts of people sharing this info with taxpayers. 

It is the most substantial credit from the federal government directed at low to medium families. The idea was for the credit to reduce Social Security Taxes' burden and encourage people to work because taxpayers might be eligible for refunds if they do not owe taxes. 

Due to the series of confusion surrounding EITC, this article will help clear things out.

  1. EITC is for Unemployed People as a Welfare System

Some people erroneously believe that people who do not work get EITC at the expense of working-class people. This is not true as you need to work before qualifying for EITC. Even the name says it all: Earned Income Tax Credit.

Wages, tips, salaries, earnings from self-employment, etc., are earned income. Benefits from union strikes are also inclusive. Passive income, however, is not earned income, meaning all income that you did not generate on your own such as dividends, Social security benefits, income from retirement, child support, and unemployment benefits, are not earned income. 

  1. You Need not be Documented to Qualify for EITC.

You need to be a citizen or resident alien to qualify for EITC as it involves having a valid International Tax Identity Number. Provided you have earned income, you, your partner, and any qualifying kid on your tax return need to have a valid SSN (Social Security Number) to qualify for EITC.

For the entire year, you need to either be a citizen or a resident alien. It is impossible for people illegally in the US to get their hands on EITC refunds except via frauds. 

  1. EITC Payment is Automatic even without Filing 

There is a requirement for qualifications for the EITC, which includes filing an income tax return at the federal level. As a result, you need to file a return even if you owe no taxes. Unfortunately, many people do not understand this, and they lose on their EITC refund as Uncle Sam has billions of dollars in tax refunds that were not claimed from year to year. 

  1. People Get EITC Refunds Immediately

If you claim either the EITC or the Additional Child Tax Credit, you will have to wait for a while to get your tax refunds. However, folks that did not claim such credit will normally get their refunds early. Uncle Sam will typically wait until mid February before sending your refunds if you claim either ACTC or EITC.  

When you consider factors like bank processing time, weekends, and the Holiday for President Day, you can expect your Refunds for EITC or ACTC to arrive about the 28th of Feb, assuming no other issues.

  1. Filing for EITC is Expensive 

Yes, EITC comes with some tricky rules that you need to navigate. For example, there are unique rules guiding the military members, people who are clergy, victims of disaster, and folks getting disability benefits. There could be age restrictions as well. 

These conditions imply that you are better off asking for help in filing than assuming that filing is expensive. You can get help from some tax professionals that will be willing to guide you through the process. 

Conclusion 

With earnings of $55,952 or below, you can decide if you are eligible for EITC by consulting a tax professional. It is also possible to use the EITC Assistant tool available On Uncle Sam’s website here.

The EITC assistant tool, which is also available in English and Spanish, can help you determine if you qualify and have qualifying  kids. The tool also helps you deduce the EITC amount you might get. The assistance also lets you know why you do not qualify in case you do not. 


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Pat Raskob
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