1040 earned income credit

1040 earned income credit

Download Form 1040 (Schedule EIC)

Be sure the child s name on line 1 and social security number (SSN) on line 2 agree with the child s social security card Otherwise at the time we process your return we may reduce or disallow your EIC If the name or SSN on the child s social security card is not correct call the Social Security Administration at 1 800 772 1213 If the child lived with you for more than half of 2011 but less than 7 months enter 7 If the child was born or died in 2011 and your home was the child s home for the entire time he or she was alive during 2011 enter 12 If you take the EIC even though you are not eligible you may not be allowed to take the credit for up to 10 years See page 2 for details It will take us longer to process your return and issue your refund if you do not fill in all lines that apply for each qualifying child No Off No Off See the instructions for Form 1040A lines 38a and 38b or Form 1040 lines 64a and 64b to makeBefore you begin: sure that (a) you can take the EIC and (b) you have a qualifying child Yes Off (as defined in the instructions for Form 1040A lines 38a and (for example son daughter grandchild niece nephew foster child etc ) 1 Child s name 2 Child s SSN The child must have an SSN as defined in the instructions for Form 1040A lines 38a and 38b or Form 1040 lines 64a and 64b unless the child was born and died in 2011 If your child was born and died in 2011 and did not have an SSN enter Died on this line and attach a copy of the child s birth certificate death certificate or hospital medical records 3 Child s year of birth 38b or Form 1040 lines 64a and 64b) 4 a Was the child under age 24 at the end of 2011 a student and younger than you (or your spouse if filing jointly)? 5 Child s relationship to you 6 Number of months child lived with you in the United States during 2011 A qualifying child for the EIC is a child who is your After you have figured your earned income credit (EIC) use Schedule EIC to give the IRS information about your qualifying child(ren) Any age and permanently and totally disabled bWas the child permanently and totally disabled during any part of 2011? Cat No 13339M Schedule EIC (Form 1040A or 1040) 2011 Do not enter more than 12 months Do not enter more than 12 months First name Last name First name Last name For Paperwork Reduction Act Notice see your tax return instructions Form 1040A lines 38a and 38b or Form 1040 lines 64a and 64b Go to line 5 Go to line 4b Go to line 5 Go to line 4b Go to The child is not a Go to The child is not a Go to The child is not a If born after 1992 and the child was younger than you (or your spouse iffiling jointly) skip lines 4a and 4b;go to line 5 If born after 1992 and the child was younger than you (or your spouse iffiling jointly) skip lines 4a and 4b;go to line 5 If the child was married or meets the conditions to be a qualifying child of another person (other than your spouse if filing a joint return) special rules apply For details see Married child or Qualifying child of more than one person in the instructions for Form 1040A lines 38a and 38b or Form 1040 lines 64a and 64b If you have more than three qualifying children you only have to list three to get the maximum credit line 5 qualifying child line 5 qualifying child line 5 qualifying child months months of 2011 If the child did not live with you for the required time or is filing a joint return for 2011 only as a claim for refund Purpose of Schedule Qualifying Child Qualifying Child Information Child 1 Child 2 Child 3 Schedule EIC (Form 1040A or 1040) 2011 Page 2 see Exception to time lived with you in the instructions for Son daughter stepchild foster child brother sister stepbrother stepsister half brother half sister or a descendant of any of them (for example your grandchild niece or nephew) Taking the EIC when not eligible If you take the EIC even though you are not eligible and it is determined that your error is due to reckless or intentional disregard of the EIC rules you will not be allowed to take the credit for 2 years even if you are otherwise eligible to do so If you fraudulently take the EIC you will not be allowed to take the credit for 10 years You may also have to pay penalties To figure the amount of your credit or to have the IRS figure it for you see the instructions for Form 1040A lines 38a and 38b or Form 1040 lines 64a and 64b Under age 19 at the end of 2011 and younger than you (or your spouse if filing jointly) Under age 24 at the end of 2011 a student and younger than you (or your spouse if filing jointly) Who is not filing a joint return for 2011 Who lived with you in the United States for more than half Yes Off You may also be able to take the additional child tax credit if your child was your dependent and under age 17 at the end of 2011 For more details see the instructions for line 39 of Form 1040A or line 65 of Form 1040


1040 earned income credit

The United States federal Earned Income Tax Credit (EITC or EIC) is a refundable tax credit . For tax year 2007, a claimant with one qualifying child can receive a maximum credit of $2,853. For two or more qualifying children, the maximum credit is $4,716. Grandparents, aunts, uncles, and siblings can also claim a child as their qualifying child provided they shared residence with the child for more than six months of the tax year. However, in tie-breaker situations in which more than one filer claims the same child, priority will be given to the parent. A foster child also counts provided the child has been officially placed by an agency or court. There is a much more modest EIC for persons and couples without children that reaches a maximum of $428.

A qualifying child can be up to and including age 18 at the end of the tax year, up to and including age 23 if classified as a full-time student for one long semester or equivalent, or any age if classified as 'totally disabled' for the tax year.

Enacted in 1975, the initially modest EIC has been expanded by tax legislation on a number of occasions, including the more widely-publicized tax acts of 1986, 1990, 1993, and 2001, regardless of whether the act in general raised taxes (1990, 1993), lowered taxes (2001), or eliminated other deductions and credits (1986). Today, the EITC is one of the largest anti-poverty tools in the United States (despite the fact that most income measures, including the poverty rate, do not account for the credit), and enjoys broad bipartisan support.

Other countries with programs similar to the EITC include the United Kingdom (see: working tax credit ), Canada (see: working income tax benefit ), Ireland , New Zealand , Austria , Belgium , Denmark , Finland , France and the Netherlands . In some cases, these are small (the maximum EITC in Finland is 290 euro s), but others are larger than the U.S. credit (the UK's working tax credit is worth up to 6150 Euros)Fact|date=August 2008.

In the United States as of tax year 2006, some 20 states and the District of Columbia had their own EICs. These state plans generally mimic the federal structure on a smaller scale, with individuals receiving a state credit equal to a fixed percentage—generally between 15 and 30 percent—of what they are eligible to receive from the federal credit. A few small local EICs have been enacted in San Francisco , New York City , and Montgomery County, Maryland .

Earned income can be a rather technical term defined by the United States tax code. The following are the main sources: IRS Publication 596 (See link under "External links" heading.)]

* Wages , salaries, tip s, commissions, and other taxable employee pay,

* Net earnings from self-employment,

* Gross income received as a statutory employee, and

* a minority of disability payments.

If a person is disabled, he or she can be any age and still count as a qualifying "child." The IRS uses the phrase "permanently and totally disabled." However, they go on to define this such that the person was disabled at any time during the tax year such that he or she could not engage in substantial gainful activity and a physician determined that the condition has lasted or is expected to last a year or more.

If a person is enrolled as a full-time student during some part of five calendar months, he or she can be up to and including age 23. For example, the standard Fall semester of an university in which classes start in late August and continue through September, October, November, and early December counts as part of five calendar months. A similar conclusion applies to the standard Spring semester. However, the five months need not be consecutive and can be obtained by any combination of shorter periods. Full-time status is often defined as ten semester hours, although the IRS defers to how each specific educational institution defines full-time status. Schools also includes technical and trade schools.

In all other cases, a person can be up to and including age 18 and can still count as a child for purposes of EIC.

You must be related to your qualifying child(ren) through blood, marriage, or officialdom. In addition, the child must be either in your same generation or a later generation. A foster child counts provided he or she has been officially placed by an agency, court, or Native American tribal government. An adopted child counts and can be in the process of being adopted provided he or she has been lawfully placed. And so, for the relatively complete list, your qualifying child can be your daughter, son, stepdaughter, stepson, grandchild, great-grandchild, sister, brother, stepsister, stepbrother, half sister, half brother, niece, nephew, great niece, great nephew, or any further descendant of these related persons.

You must live with your qualifying child(ren) within the fifty states of the United States for more than half the tax year (six months and one day). Persons on active military duty are considered to be living within the United States. Temporary absences, for either you or the child, due to school, hospital stays, business trips, vacations, periods of military service, or jail or detention counts as time lived at home. "Temporary" is perhaps unavoidably vague and generally hinges or whether you or the child are expected to return, although the IRS is somewhat lenient and can count rather lengthy periods as temporary.

Investment income cannot be greater than $2,900.

A claimant must be either a United States citizen or resident alien. In the case of married filing jointly where one spouse is and one isn't, the couple can elect to treat the nonresident spouse as resident and have their entire worldwide income subject to U.S. tax, and will then be eligible for EIC.

Filers both with and without qualifying children must have lived in the United States for more than half the tax year. Perhaps surprisingly, Puerto Rico, American Samoa, the Northern Mariana Islands, and other U.S. territories do not count in this regard. A person on extended military duty is considered to have met this requirement for that period of time.

For persons without a qualifying child, there is an age requirement in that the person must be from age 25 to 64.

Persons without a qualifying child must themselves not be claimable as a dependent; persons with qualifying children must merely not be claimable as a qualifying child. This is a subtle distinction that sometimes plays out.

All filers (and children being claimed) must have a valid social security number. This includes social security cards printed with "Valid for work only with INS authorization" and "Valid for work only with DHS authorization."

For all filers, married filing separately acts as a disqualifying status and a person filing under that status will not be eligible for EIC. However, if the person has lived apart from their spouse for the last six months of the year, has jointly or individually paid more than half the cost of keeping up a main home (or several main homes) for six months for themselves and their qualifying child, and can claim that child as a dependent (or could claim, but are waiving the dependency to the other parent), the person can file as head of household and thus be eligible for EIC. Alternatively, if a person obtains a divorce by December 31, that will carry, since it is marital status on the last day of the year that controls for tax purposes. In addition, if a person is "legally separated" by December 31, that will also carry. [see 1040 Instructions]

EIC phases out by the greater of earned income or adjusted gross income.

The credit is characterized by a three-stage structure that consists of phase-in, plateau, and phase-out.

The same data, in words: for a person with two qualifying children, the credit is equal to 40% of the first $11,790 of earned income, thusly reaching a plateau of $4,716 and staying there until earnings increase beyond $15,399, at which point the credit begins to phase out at 21%, reaching zero as earnings pass $37,782. The dollar amounts are indexed annually for inflation.

For married filing jointly, the plateaus travel $2,000 further.

This table, and the graph below, might make it appear as though EITC moves smoothly. In actuality, the amount of the credit is given by an IRS table that divides earned income into fifty dollar increments from $1 to $39,783 (the three cases of no child, one child, and two or more children all end at somewhat awkward numbers).

The EITC is the largest poverty reduction program in the United States. Almost 21 million American families received more than $36 billion in refunds through the EITC in 2004. These EITC dollars had a significant impact on the lives and communities of the nation’s lowest paid working people, lifting more than 5 million of these families above the federal poverty line.Seccombe, 2007

Further, economists suggest that every increased dollar received by low and moderate-income families has a multiplier effect of between 1.5 to 2 times the original amount, in terms of its impact on the local economy and how much money is spent in and around the communities where these families live. Using the conservative estimate that for every $1 in EITC funds received, $1.50 ends up being spent locally, would mean that low income neighborhoods are effectively gaining as much as $18.4 billion.Seccombe, 2007

Due to its structure, the EIC is effective at targeting assistance to low-income families. By contrast, only 30% of minimum wage workers live in families near or below the federal poverty line, as most are teenagers, young adults, students, or spouses supplementing their studies or family income. [cite web|title=The Low-Wage Labor Market|first=Mark|last=Turner|url=http://aspe.hhs.gov/hsp/lwlm99/turner.htm|date=2007-01-17] [cite web|title=Characteristics of Minimum Wage Workers: 2005|publisher=Bureau of Labor Statistics, US Department of Labor|url=http://www.bls.gov/cps/minwage2005.htm|date=2007-01-17] Opponents of the minimum wage argue that it is a less efficient means to help the poor than adjusting the EITC.

It is difficult to measure the cost of the EITC to the Federal Government. At the most basic level, federal revenues are decreased by the lower, and often negative, tax burden on the working poor for which the EITC is responsible. In this basic sense, the cost of the EITC to the Federal Government was more than $36 billion in 2004.

At the same time, however, this cost may be at least partially offset by several factors: 1) any new taxes (such as payroll taxes paid by employers) generated by new workers drawn by the EITC into the labor force, 2) any reductions in entitlement spending that result from individuals being lifted out of poverty by the EITC (the poverty line is sometimes a watermark for eligibility for state and federal benefits), and 3) taxes generated on additional spending done by families receiving earned income tax credit.

Millions of American families who are eligible for the EITC do not receive it, leaving billions of additional tax credit dollars unclaimed. Research by the Government Accountability Office (GAO) and Internal Revenue Service indicates that between 15% and 25% of household s who are entitled to the EITC do not claim their credit, or between 3.5 million and 7 million households.

The average EITC amount received per family in 2002 was $1,766. Using this figure and a 15% unclaimed rate would mean that low-wage workers and their families lost out on more than $6.5 billion, or more than $12 billion if the unclaimed rate is 25%.

Many nonprofit organizations around the United States, sometimes in partnership with government and with some public financing, have begun programs designed to increase EITC utilization by raising awareness of the credit and assisting with the filing of the relevant tax forms.

"RALs" (Refund Anticipation Loans)

The combination of EIC and Refund Anticipation Loans is the primary engine which has built the storefront tax preparation industry, including the very familiar companies of H&R Block, Jackson Hewitt, and Liberty Tax, as well as smaller chains and independent practitioners. RALs have been criticized on various grounds [ [http://www.irs.gov/pub/irs-utl/2005_arc_executive_summary_final.pdf National Taxpayer Advocate 2005 Annual Report to Congress, Executive Summary] The Most Serious Problems Encountered by Taxpayers, 8. Refund Anticipation Loans: Oversight of the Industry, Cross-Collection Techniques, and Payment Alternatives.] [ [http://www.irs.gov/pub/irs-utl/2007_objectives_report_vol_ii_ral_final.pdf The role of the IRS in the refund anticipation loan industry] , National Taxpayer Advocate’s 2007 Objectives Report to Congress, June 30, 2006] [ [http://www.consumer-action.org/press/articles/rals_drain_off_millions_in_taxpayer_refunds RALs drain off millions in taxpayer refunds] , National Consumer Law Center, published by consumer-action.org, February 5, 2007] . The loans are often not as easy to be approved for as the advertising implies. In fact, advertisements such as "Rapid Refund" do not make it clear that it's a loan at all. Customers denied the loans are then required to accept the two-week bank product, in which the account merely sits empty waiting for the IRS refund. And although such customers do not pay interest, they still pay all the other fees. In addition, there is the practice known as "cross-collection," in which the loan-issuing bank, such as HSBC or Santa Barbara Bank & Trust in recent years, engages in debt collection for other companies, notably credit card companies. That is, HSBC or Santa Barbara will take all or part of a client's tax refund for purposes of third party debt collection. This practice is often not adequately disclosed to the tax preparation client. [ [http://ag.ca.gov/newsalerts/release.php?id=1261 Refund Anticipation Loans Enrich Firm, But Drain Millions from Low-Income Families] , State of California - Office of the Attorney General, February 15, 2006]

* Taxation in the United States

* Guaranteed minimum income

* Negative income tax

*IRS [http://www.irs.gov/individuals/article/0,,id=130102,00.html EITC Assistant] , which can help determine if you qualify for EITC

*IRS [http://www.irs.gov/pub/irs-pdf/i1040gi.pdf 1040 Instructions, 2007] , Earned Income Credit instructions on pages 44–50, table on pages 51–58.

*IRS [http://www.irs.gov/pub/irs-pdf/f1040sei.pdf Schedule EIC] . Taxpayers claiming qualifying child(ren) need to include this form with their tax return.

*IRS [http://www.irs.gov/pub/irs-pdf/p596.pdf Publication 596 - Earned Income Credit] , a publication aimed at people who will potentially be claiming the credit.

* [http://www.tax-coalition.org/ National Community Tax Coalition] , an organization that supports the EITC and tries to help make sure people claim it

* [http://www.bostontaxhelp.org/ Boston EITC Campaign]

* [http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=108_green_book&docid=f:wm006_13.pdf Section 13] ("Tax Provisions Related to Retirement, Health, Poverty, Employment, Disability, and Other Social Issues") of the House Ways and Means Committee 's [http://www.gpoaccess.gov/wmprints/green/ Green Book] provides historical information, including previous EITC parameters. (The version linked to here is the 2004 edition. Note: it's not published anuually.)

* [http://www.cbo.gov/ftpdocs/77xx/doc7721/01-09-MinimumWageEITC.pdf Congressional Budget Office report for Senate Finance Committee, on "the Effects of Increasing the Federal Minimum Wage Versus Expanding the Earned Income Tax Credit" (January 9, 2007)]

* [http://www.cbpp.org/311eitc.htm New Research Findings on the Effects of the Earned Income Tax Credit, Center on Budget and Policy Priorities, March 11, 1998]

* [http://digital.library.unt.edu/govdocs/crs/data/2005/meta-crs-7962.tkl The Earned Income Tax Credit (EITC): Percentage of Total Tax Returns and Credit Amount by State] a Congressional Research Service (CRS) Report

* [http://www.brookings.edu/metro/pubs/20060209_Holt.htm The Earned Income Tax Credit at Age 30: What We Know] , Steve Holt, the Brookings Institution

* [http://books.google.com/books?id=K4mjOmUz8xMC&printsec=frontcover9amp;dq=Tax+Expenditures9amp;sig=ecWzVVu_8QVhcrN-EmKCUNGFLJ4#PPA64,M1 The Hidden Welfare State: Tax Expenditures and Social Policy in the United States] , Christopher Howard, Princeton University Press, 1997. Mr. Howard discusses the mortgage interest deduction, employer pensions, EITC, and the targeted jobs tax credit as examples of tax expenditures.

*http://bostontaxhelp.libsyn.com/ Boston Tax Help podcast. Produced by Craig Far-Corporate/Community Partnerships/Boston EITC Campaign

Wikimedia Foundation . 2010 .

Earned Income Tax Credit — Lohnauffüllung bezeichnet Formen der Lohnsubvention mit einem anteiligen Auszahlbetrag in Abhängigkeit vom erworbenen Einkommen. In der Regel meint man damit die Earned Income Tax Credit (wörtlich Arbeitseinkommensteuergutschrift ) der USA und… … Deutsch Wikipedia

Income tax in the United States — UStaxationThe federal government of the United States imposes a progressive tax on the taxable income of individuals, partnerships, companies, corporations, trusts, decedents estates, and certain bankruptcy estates. Some state and municipal… … Wikipedia

Tax credit — The term tax credit describes two different concepts:*The first is a recognition of partial payment already made towards taxes due. *The second is a state benefit paid to employees through the tax system, which has the effect of increasing… … Wikipedia

income tax — a tax levied on incomes, esp. an annual government tax on personal incomes. [1790 1800] * * * Levy imposed by public authority on the incomes of persons or corporations within its jurisdiction. In nations with an advanced system of private… … Universalium

Income tax in Australia — Broadly, Australia levies tax on three sources of income for individual taxpayers: personal earnings (for example, salary and wages), business income, and capital gains. Income received by individuals is taxed at progressive rates. Income derived … Wikipedia

earned income credit — A refundable tax credit on earned income up to a certain amount for low income workers who maintain a household for dependent children. The amount of the credit is reduced dollar for dollar if earned income (or adjusted gross income) is greater… … Black's law dictionary

earned income credit — A refundable tax credit on earned income up to a certain amount for low income workers who maintain a household for dependent children. The amount of the credit is reduced dollar for dollar if earned income (or adjusted gross income) is greater… … Black's law dictionary

Earned Income Credit - EIC — A tax credit for low income workers. Even workers whose incomes are too small to have paid taxes can get EIC. This credit varies with family size, income and the number of children … Investment dictionary

earned income credit — A tax credit for taxpayers with children. Bloomberg Financial Dictionary … Financial and business terms

Additional Child Tax Credit — A refundable credit that can be claimed by taxpayers who are ineligible to claim the full non refundable child tax credit, because it exceeds their total tax liability. The additional child tax credit was created to reimburse taxpayers for the… … Investment dictionary


The Earned Income Tax Credit: A Valuable Credit for Low Income Earners

The Earned Income Tax Credit (EITC) is money the federal government provides to low income working people to help them make ends meet. The EITC is administered by the IRS, but you don't have to owe or pay any federal income taxes to qualify for it. However, to get the credit, you need to file a tax return and specifically claim the EITC. Many people who qualify for the EITC don't receive it because they fail to file.

To qualify for the EITC, you must

  • be at least 25 years old, but under 65 years old
  • live in the United States for at least half the year
  • not be someone else's dependent or child for EITC purposes, and
  • have earned income--such as wages, tips, or income from running a business--but not too much of it.

The income limit depends on your family size. The more "qualifying children" you have, the larger your income may be for qualifying purposes. A qualifying child can include your son, daughter, adopted child, stepchild, foster child, or a descendant of any of them, such as your grandchild, or your brother, sister, half brother, half sister, step brother, step sister, or a descendant of any of them such as a niece or nephew. The child must live with you at least half the year and be younger than 19 (24 if a full-time student).

For 2017, you qualify for the credit if your earned income is less than:

  • $15,010 ($20,600 if married filing jointly) with no qualifying children; ($14,880 and $20,430 in 2016)
  • $39,617 ($45,207 if married filing jointly) with one qualifying child; ($39,296 and $44,846 in 2016)
  • $45,007 ($50,597 if married filing jointly) with two qualifying children; ($44,648 and $50,198 in 2016), or
  • $48,340 ($53,930 if married filing jointly) with three or more qualifying children ($47,955 and $53,505 in 2016).

Check the IRS website for the annually adjusted amounts.

If you have income other than earned income, such as unemployment payments, taxable Social Security payments, alimony, investment income (which can't exceed $3,200), or retirement benefits, you must add it toward the limit. You need not add government assistance you receive, such as food stamps, Medicaid, or Supplemental Security Income (SSI).

The IRS has a EITC Assistant tool on its website that you can use to see if you qualify.

The amount of your credit depends on your income. The maximum credits for 2017 are:

  • $510 with no qualifying children ($496 in 2016)
  • $3,400 with one qualifying child ($3,305 in 2016)
  • $5,616 with two qualifying children, ($5,460 in 2016), or
  • $6,318 with three or more qualifying children ($6,143 in 2016).

If you owe any taxes for the year, your credit will first be subtracted from this amount, and the rest paid directly to you. If you owe no taxes, you'll be paid the full amount of the credit. Some workers have their credits prepaid through their employers as “negative withholding” from their paychecks.

The IRS online EITC Assistant can tell you how much you qualify for. If you don't want to go online, the instructions for Form 1040, 1040A, and 1040EZ contain a worksheet and earned income credit table you can use to determine the amount of the credit.

To claim the EITC, you must file an IRS income tax form, either: Form 1040, 1040A, or 1040EZ. If you have one or more qualifying children, you must complete Schedule EIC and attach it to your tax return. Schedule EIC provides the IRS with information about the qualifying children, including their names, ages, Social Security numbers, relationship to you, and the amount of time they lived with you during the year.

More than half the people who qualify for the EITC use a tax preparer to prepare their returns. You can use a paid preparer--many preparers will deduct their fee from your EITC payments rather than make you pay up front.

However, if you qualify for the EITC, you probably also qualify for free tax preparation through the IRS Volunteer Income Tax Assistance program (VITA). The VITA Program offers free tax help from IRS-certified volunteers. There are thousands of VITA sites located at community and neighborhood centers, libraries, schools, shopping malls, and other locations. To find a site, use the online the VITA Locator Tool or call 800-906-9887.

You can get more information on claiming EITC at the IRS website.

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