Find out if you qualify to receive thousands of dollars in tax relief through the EITC
Tax credits can help working-class Americans boost their bank account balances, pay down debt, pay bills or even afford a few treats, from needed home renovations to a vacation.
Many credits, including the Earned Income Tax Credit (EITC) are fully refundable, which means even if you don’t owe taxes in April, you can still receive the money. Non-refundable tax credits can only be used to reduce the taxes you owe, while partially refundable credits allow you to receive a portion of the refund, even if you don’t owe taxes on the current year’s return.
The EITC was designed to help lift working Americans out of poverty and cover some of their basic needs.
In 2023, the Internal Revenue Service reported that roughly 23 million workers and their families received close to $57 billion in EITC, with an average refund of $2,541 thanks to the credit.
If your EITC credit was previously reduced or disallowed, you may have to file IRS Form 8862 to prove your qualifications and receive the credit on your latest tax return.
The Value of the EITC to Working Families
Only four out of five workers who qualify have claimed the EITC in recent years, according to the IRS. Yet, this credit can be a powerful tool against poverty. In 2018, the latest year for which the IRS shared data, the EITC and Child Tax Credit (CTC), combined, lifted more than 5.6 million people out of poverty and helped 17.5 million others.
In the 2024 tax year, you can receive as much as $7,830 back from the EIC if you have three or more qualifying children, while single filers with no dependents could receive up to $632.
Resistance to Claiming EITC: Don’t Let These Myths Keep You from the Money You Deserve
“There’s a lot of misinformation surrounding the EITC,” said George Baseluos, Alleviate Tax CEO. “Some people believe claiming the EITC will delay their refund. Others believe it will lead to an audit. Some people think it’s too complicated to file. But one of the main problems is people don’t know this useful tax credit exists or how to claim it.”
Let’s explore these myths and then go through the steps to see if you qualify.
Does Claiming EITC Delay Your Refund?
This “myth” is sort of true – but it’s not as big of a deal as most people think if you plan ahead. The IRS cannot process any refunds with an Earned Income Credit (EIC) claim until mid-February. It typically takes less than three weeks for the IRS to process a refund.
That means if you file your taxes and claim the EIC on February 1, the IRS will begin processing those returns in mid-February. If you were one of the first to file, you will likely receive your tax refund by early-to-mid-March. If you plan to file after February 14, anyway, you shouldn’t notice a delay in the IRS processing your return.
“Taxpayers can also take advantage of “early refund” programs from tax preparers or borrow money against their tax refund to receive money on the same day they file,” Baseluos said. “So the possibility of a refund delay should not keep taxpayers from claiming the funds they need.”
Does Claiming EITC Lead to An Audit?
Like the myth of processing delays, the belief that claiming the EIC leads to an audit has some basis in truth. Roughly 1% of tax returns claiming EITC get flagged for an audit, according to data reported by the Taxpayer Advocate Service. Yet, that’s less than half of tax returns for filers with income exceeding $10 million. In 2020, 2.4% of these ultra-wealthy taxpayers were flagged for an audit.
Still, in general only 0.2% of all tax returns were flagged for an audit in 2020, according to CBSNews.com. “Claiming EIC may increase your odds of an audit, but not as much as being ultra-wealthy and claiming disproportionate or inappropriate deductions,” Baseluos said.
In most cases (92%), EIC audits are “correspondence audits,” which typically require sharing additional proof of your qualifications with the IRS by mail. Learn more about how to respond to a correspondence audit here.
Do You Need a Tax Preparer to Help You Claim the EITC?
If you have successfully claimed the EITC in the past and your financial situation or number of qualifying children hasn’t changed, you probably don’t need a tax preparer to help you claim the EIC.
But if you have any questions or aren’t sure if you qualify, you may want to seek help from a tax professional. If you qualify for EITC, you may qualify for free tax help through Volunteer Assistance Sites (VITA).
Understand the Earned Income Tax Credit Qualifications
You can see if you qualify for the EITC before claiming the credit, which can reduce your chances of an audit. Here are some of the basic qualifications:
- Investment income less than $11,599
- Must have a valid Social Security Number prior to the due date for filing taxes (including any extensions)
- Must be United States citizen or legal resident alien for the full year
- Meet maximum Adjusted Gross Income limits
- Have earned income for the tax year, which can include W-2 or 1099 income
Additionally, you cannot have filed Form 2555, required to show any Foreign Earned Income. Note that adoption taxpayer identification numbers (ATINs) or individual taxpayer identification numbers (ITINs) do not qualify for EIC filings. Also, any qualifying child you claim to increase your credit must have a valid SSN.
The AGI threshold changes each year based on inflation, but the highest allowable AGI for a couple, filing jointly, with three qualifying children is $66,819. The highest allowable AGI for an individual taxpayers with no qualifying children is $18,591 in 2024. You can find out how to calculate your AGI here.
Claiming EITC With Children
Beyond these basic qualifications, your qualifying children must meet certain requirements. The child must:
- Be under 19 at the end of the year or under 24 and a full-time student for at least five months of the year (and younger than you or your spouse)
- Related to you by blood or marriage or legally adopted or placed in your foster care (under certain circumstances)
- Live in your home for more than half the year
Additionally, to qualify, a child cannot file a joint return with another person to claim the EITC or other fully refundable credits.
Claiming EITC Without Qualifying Children
If you or your spouse (if married, filing jointly) don’t have any qualifying children, you must have your primary residence in the U.S. for more than half the tax year; the U.S. includes the 50 states, District of Columbia, and U.S. military bases. Neither of you can be claimed as a qualifying child on someone else’s tax return, and at least one spouse must be at least 25 years old but under age 65.
Conclusion
Have past-due taxes and failed to claim the EITC in the past? You may be owed thousands of dollars in refundable tax credits that may help alleviate your tax debt. If you owe back taxes, the professionals at Alleviate Tax are here to help. Reach out now.
FAQs
What qualifies you for earned income credit?
If you can claim earned income on your tax return and have an AGI under a certain threshold, ranging from $18,591 for individual taxpayers with no children up to $66,819 for couples with three or more children, you may qualify for the earned income tax credit. You must be a U.S. resident or legal alien with a valid Social Security Number and must not have investment income totaling more than $11,600.
How much does Earned Income Credit pay?
Depending on your filing status and number of qualifying children, you may be able to claim up to $7,430 in fully refundable tax credits through the EIC.
Is EIC based on total income?
The amount of the Earned Income Tax Credit you can claim depends on your filing status, adjusted gross income, and the number of qualifying children you can declare.
