Originally created by Congress in 1975 and enhanced by the American Recovery and Reinvestment Act of 2009, the Earned Income Tax Credit is a refundable federal income tax credit for some 26 million low to moderate income working individuals and families intended to offset the burden of Social Security taxes and to provide an incentive to work. When EITC exceeds the amount of taxes owed, it results in a tax refund to those who claim and qualify for it.
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For 2010 tax returns, the maximum EITC tax credit is $5,666 for workers with three or more dependent children. Workers with fewer than three dependent children, including those with no children, may be eligible for a smaller credit amount. Starting in 2013, the maximum EITC credit will be available to workers with two dependent children.
"Millions of workers who did not earn high incomes claimed the EITC last year," said Doug Shulman, IRS commissioner in a press release. "The IRS encourages all eligible taxpayers to claim this valuable credit. Together with our partners, we can help taxpayers file their returns and get the EITC."
According to Shulman, qualifying taxpayers who claimed the EITC last year got an extra $2,200 refund from the credit on average. For 2010, workers who earned $48,362 or less from wages, self-employment or farm income last year could receive larger refunds if they qualify for the EITC, Schulman added.
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In determining a taxpayer's eligibility for the EITC tax credit, the IRS takes into account a number of factors including earnings, filing status and eligible children. Many taxpayers who experienced a change in these factors will qualify for the first time this year and may not be aware of the credit, noted the IRS.
Even if a taxpayer is not otherwise required to file, he or she must file a tax return in order to claim the EITC tax credit. According to the IRS, those who typically qualify for but fail to claim the EITC include rural workers and their families; non-traditional families, such as grandparents or foster parents raising children; taxpayers without qualifying children; individuals with limited English proficiency; Native Americans; and taxpayers with disabilities.
Rules for tax year 2010 EITC eligibility are provided by the IRS on their EITC Eligibility Rules for 2010 Tax Year Outlined web page.
In addition, the IRS provides a simple, online eligibility tool taxpayers can use to find out if they qualify to claim the Earned Income Tax Credit (EITC) by answering a few simple questions. No personal identification information is requested or required to determine EITC eligibility.