Over time, many people believe there has been a greater disparity among the world’s population of poor and working class families and the rich and upper class people. Since this is the perception (and maybe reality), the state has intervened to help bridge the disparity gap between the two segments. A number of steps have been taken in this regard to benefit the working, low class and moderate income families residing within the US. One such step is the Earned Income Tax Credit. This article will take you through what Earned Income Tax Credit is and how you can avail it.
Earned Income Tax Credit is also referred to as EITC. This is a federal tax credit that is available to people that have a moderate or low income. The tax credit is basically designed to subsidize the living of low income families. The credit, simply put, is equal to the percentage of earnings that are fixed from the first dollar that you earn, right up until the credit reaches its maximum. Primarily, the maximum limit of the tax credit as well as the percentage that you get, will depend on the number of children that you have.
If you have hired a tax accountant to file your taxes, let us first tell you the intricacies of who can avail the EITC. When you are filing for your taxes of the year 2015, due in the year 2016, you should know that working families that have an income of around $39000 to $53300 per year will be eligible for the EITC, subject to the number of dependent children they have and their marital status.
Here are a few eligibility requirements for an EITC that a low income family needs to have. Most of these will be highlighted to you by a good tax accountant.
To qualify for the tax credit, you:
Need to earn an income, whatever the amount may be
Need to possess a social security number that is valid. If you are filing solo, you will only need your Social Security Number and if you are filing jointly with your spouse, you will also need their social security number and the details of any children that qualify. These are all the things you should have before you find a tax preparer to help you file your taxes.
Must have not and will not be filing the Form 2555 EZ and the Form 2555 for the last tax year.
Should not have an investment income that exceeds $3400.
Should have been a citizen of the US or a resident Alien in the US for a whole year.
Must have filed a return as either a married couple filing jointly, Qualifying widower, Head of Household or Single filing status, even if you don’t have to file the tax return.
There are also some other specific requirements that you will need to keep in mind when filing taxes. As these are quite complex, it is best if you find a tax professional for Earned Income Tax Credit. The other terms include:
If you are not claiming a qualifying child, then for you to qualify for the EITC, your Gross Income for the year must not exceed $14820.
Similarly, if you are claiming one qualifying child, your annual income needs to be around $39131.
When you are claiming 2 qualifying children, your gross yearly income needs to be less than equal to $44454.
For claims of 3+ kids, the highest gross income that qualifies for EITC is $47747.
One of the reasons why most people look for a tax professional for Earned Income Tax Credit is because the process is often mystifying for the general public. What to claim, who can claim and when can their claims be filed are all aspects that encourage their use of a tax accountant or a tax preparer.
The Earned Income Tax Credit is for families that work hard despite their economic standpoints to earn a living. In this respect, income that is derived from investments, irrespective of its source, can disqualify you if it passes a set limit. The set limit is $3,350 in one year.
Other kinds of income such as spousal support, child support, social security benefits, and retirement’s income and unemployment benefits can all disqualify you from getting the tax credit because you don’t have to work for either of these incomes.
A number of individuals are unable to make use of the EITC because they have an assumption that they don’t qualify. At the top of the list are the self employed people. They believe that the IRC only looks at income in the form of monthly wages by working class individuals. This however, is not the case.
The IRC takes into account any all kinds of income just as long as they are earned and not inherited or ones that you get at home without having to work for them. Even if you think you are ineligible for the tax credit, make sure you take a second opinion from a tax accountant since the rules of the IRS keep changing.
It is best that you hire a tax accountant or another tax professional to deal with your taxes. There are a number of changes every year that can happen with your tax codes. This means that the state can introduce new tax credits and alter the eligibility criteria of the previous ones, some of which your business can make use of and enjoy greater tax credits with. If you make use of these tax professionals, you will be able to give yourself greater financial freedom.
Yet, always remember that the more lucrative the tax credit is, the higher the chance that you can be conned into it. Hence, it is important that you do extensive research to find a tax preparer that is reliable like us, at David C. Ellwanger, CPA, P.C., as we will help you avail maximum tax credits with our extensive tax knowledge. So schedule a visit at our office in Henrico, VA by clicking the link below to get rid of your tax issues.
