The Internal Revenue Service re-launched its annual outreach campaign Friday, in conjunction with community organizations, to promote awareness of the Earned Income Tax Credit.
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The EITC Awareness Day outreach campaign aims to help millions of American taxpayers who earned $50,270 take advantage of the refundable tax credit.
Local officials and community organizations across the country are sponsoring over 250 news conferences and other outreach events Friday highlighting the benefits of this key work incentive for low-and moderate-income workers and working families, according to the IRS.
The annual campaign is necessary because one-third of the eligible population changes each year as their financial, marital and parental statuses change. While an estimated four out of five eligible workers and families get the credit, one in five still miss out on it, either because they don’t claim it when filing, or don’t file a tax return at all.
“A large part of the nation sees major changes every year with their tax situation,” said IRS Acting Commissioner Steven T. Miller in a statement. “This year, millions of workers could qualify for EITC for the first time, and the IRS urges them not to overlook this valuable credit.”
The EITC varies by income, family size and filing status. The average EITC amount last year was around $2,200. People can see if they qualify for the tax credit by visiting IRS.gov and answering a few questions using the EITC Assistant. In tax year 2011, more than 27 million eligible workers and families received nearly $62 billion total in EITC.
Workers, self-employed people and farmers who earned $50,270 or less last year could receive larger refunds if they qualify for the EITC. That could mean up to $475 in EITC for people without children, and a maximum credit of up to $5,891 for those with three or more qualifying children. Unlike most deductions and credits, the EITC is refundable, so those eligible may get a refund from the IRS even if they owe no tax.
The EITC provides a financial boost for millions of hard-working Americans. However, the IRS reminded taxpayers that even though most federal tax refunds are issued in less than 21 days, many factors can affect how long it may take for taxpayers to get their refunds. It is also possible that a tax return could require additional review and therefore take longer to process. Taxpayers can track the status of their refund with the “Where’s My Refund?” tool available for use on the IRS.gov website after the IRS starts processing tax returns on Jan. 30.
How to Claim the EITC
Following the late tax law changes made by Congress, the IRS plans to open the 2013 tax filing season and begin processing both paper and e-filed individual income returns on Jan. 30 after updating forms and completing programming and testing of its processing systems. The vast majority of taxpayers who qualify can begin to file EITC claims with their federal tax return starting on Jan. 30, 2013.
To get the EITC, workers must file a tax return, even if they are not required to file, and specifically claim the credit. Those eligible for the EITC have free options to file a tax return to claim the credit:
• Free File on IRS.gov: Free brand-name tax software walks people through a question and answer format to help them prepare their returns and claim every credit and deduction for which they are eligible. The program also allows people to file electronically for free, using Free File Fillable Forms, which are online versions of our paper forms designed for taxpayers comfortable preparing their own returns.
• Free tax preparation sites: EITC-eligible workers can seek free tax preparation at thousands of Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) sites. To locate the nearest site, taxpayers can search www.IRS.gov or call the IRS at 800-906-9887. Taxpayers can also find VITA/TCE sites by calling their community’s 211 or 311 line for local services.
• IRS Taxpayer Assistance Centers: EITC-eligible workers can seek free assistance in IRS locations across the country. Locations are listed online at www.IRS.gov. Hours and services offered vary by location and should be checked before visiting.
The Earned Income Tax Credit has been around since 1975 and can be a boost for workers who earned $50,270 or less in 2012. Yet the IRS estimates that one out of five eligible taxpayers fails to claim their EITC each year. The IRS wants everyone who is eligible for the credit to get the credit that they’ve earned.
Here are the top five things the IRS wants taxpayers and tax preparers to know about the EITC.
1. EITC is valuable. The EITC not only reduces the federal tax a taxpayer owes, but could result in a refund. You base the amount of EITC on your earned income and the number of qualifying children in your household. The average credit was around $2,200 last year. If you qualify, the credit could be worth up to $5,891.
2. Review your or your client's eligibility. If your financial, marital or parental situations change from year to year, you should review the EITC eligibility rules. Just because you didn’t qualify last year doesn’t mean you won’t this year.
3. File the return. If you or clients are eligible for the EITC, you must file a federal income tax return to claim the credit–even if you are not otherwise required to file. Remember to include Schedule EIC, Earned Income Credit, when you file your Form 1040. If you file Form 1040A, use the EIC worksheet and keep it for your records. If you use IRS e-file to prepare and file your tax return, the software will guide you and not let you forget this important step. E-file does the work and figures your EITC for you!
4. Know the qualifications. You should understand the qualifications for EITC before claiming it, including:
o You do not qualify for EITC if your tax filing status is Married Filing Separately.
o You must have a valid Social Security number for yourself, your spouse – if filing a joint tax return – and any qualifying child listed on Schedule EIC.
o You must have earned income. You have earned income if you are paid wages, you are self-employed, you have income from farming or you receive disability income.
o Married couples and single people without children may qualify. If you do not have qualifying children, you must also meet age and residency requirements as well as dependency rules.
o Special rules apply to members of the U.S. Armed Forces in combat zones. Members of the military can elect to include their nontaxable combat pay as earned income for the purpose of computing the EITC. Even if you make this choice, your combat pay will remain nontaxable.
5. Use the EITC Assistant. It’s easy to determine if you qualify. The EITC Assistant, a helpful tool available on IRS.gov, removes the guesswork from eligibility rules. Just answer a few simple questions to find out if you qualify and to estimate the amount of your EITC.
With IRS Free File, you can claim EITC by using brand name tax preparation software to prepare and e-file your tax return for free. It's available exclusively at IRS.gov/freefile. Free help preparing your return to claim your EITC is also available at one of thousands of Volunteer Income Tax Assistance sites around the country. To find the volunteer site nearest to you, use the VITA locator tool on IRS.gov.
For more information about the EITC, see IRS Publication 596, Earned Income Credit. It’s available in English and Spanish on IRS.gov or by calling 800-TAX-FORM (800-829-3676).