EITC can be all yours

[question everything]

http://www.dailynews.com/Stories/0,1413,200~20950~2013457,00.html#

If you're a low-income worker, the IRS may be after you -- to make sure you claim and receive a tax credit you are entitled to.

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But the group of workers eligible for the credit extends far beyond lower-income Hispanics. According to the most recent estimates from the General Accounting Office, about 4.3 million U.S. households eligible for the credit failed to claim it in 1999, losing out on almost $3 billion.

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Enacted in 1975, the earned-income tax credit, or EITC, is a federal income tax credit for low-income workers who meet certain eligibility requirements. The credit reduces dollar for dollar the amount of tax that a taxpayer owes. In addition, workers whose income is too low to owe any federal income taxes may receive the credit as a payment from the IRS. Last year, some 20 million workers collected more than $36 billion in EITC payments.

Some opponents of the earned-income tax credit criticize this feature, contending it amounts to a government handout to people who pay no income taxes. They also complain that the credit, with complex and difficult-to-administer eligibility rules, encourages fraud and abuse.

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To qualify, taxpayers of course must have "earned income," which in IRS jargon means taxable wages, salaries and tips, net earnings from self-employment and gross income received as a statutory employee. And they cannot have more than $2,600 in investment income.

[ajacobson]

1. It is one of a number of credits

intended to help low income working families, others being the child tax credit and the child care and dependent care tax credit.

As for EITC, for people with no children the credit is a max of $4,990 earned income x 7.65%=$381.74 credit and begins to phase out at $7,240 adjusted gross income and completely phases out at $12,230. For families with one child, the credit is a max of $7,490 earned income x 34%=$2,547 credit and begins to phase out at $14,730 AGI and completely phases out at $30,566. For families with two or more children, the credit is a max of $10,510 earned income x 40%=$4,204 credit and begins to phase out at $14,730 AGI and completely phases out at $34,692.

The IRS has instituted a precertification form to receive EITC, the W-5 form, due to $9.9 billion of overclaims. That aside, there are an estimated 4.3 million taxpayers eligible but not receiving the tax credit.