Qualifying for the Earned Income Tax Credit

FS-2020-01, January 2020
 
The Earned Income Tax Credit (EITC) is
 a financial boost for families with low- or moderate- incomes. Millions of workers may qualify for the first time this year due to changes in their marital, parental or financial status.  The EITC is a refundable tax credit. This means workers may get money back, even if they owe no tax. Last year, around 25 million taxpayers received about $61 billion in EITC.

The IRS urges workers who earned $55,952 or less in 2019 to see if they qualify. This includes people who work for someone else and those who have their own business or farm. One way they can see if they qualify is to use the EITC Assistant on IRS.gov. Using the EITC Assistant helps taxpayers because EITC is complex and many special rules apply.
To get it right, the IRS encourages workers to do their taxes using the IRS Free File program, by choosing a trusted tax professional, or at a local free tax preparation site.

Credit Limits for Tax-Year 2019
The amount of EITC varies based on income, filing status and family size. Those who qualify can get a credit up to:

  • $529 with no qualifying children
  • $3,526 with one qualifying child  
  • $5,828 with two qualifying children
  • $6,557 with three or more qualifying children
Last year, the average amount of EITC was $2,504.

Qualifying for EITC
To qualify, workers must have earned income and adjusted gross income within certain limits and meet certain basic rules. Then, the worker must meet the rules for those without a qualifying child or have a child who meets all the qualifying child rules.
 
Only one person can claim the same qualifying child
If a child meets the rules to be a qualifying child for more than one person, only one person can use that child to claim the EITC. Also, if the child qualifies for both a parent and a non-parent, the non-parent can only get the credit if he or she has a higher AGI than either of the child’s parents. After applying the tie-breaker rules, the person who does not claim the qualifying child may claim the EITC without a qualifying child, as long as all other requirements are met.
 
Combat pay normally exempt from tax, not included in AGI
Under a special rule, those who receive combat pay can choose to count it as taxable income for figuring the amount of EITC. This may or may not increase the amount of the EITC. Normally, combat pay is exempt from tax. The IRS encourages those receiving combat pay to figure their taxes both ways to make sure they get the most benefit. There are also special rules for those with certain types of disability income and members of the clergy.
To learn more, go to irs.gov/eitc for the Who Qualifies section or use the EITC Assistant.
 
Social Security numbers required for everyone
The IRS reminds taxpayers to be sure they have a valid SSN for themselves, their spouse if filing a joint return, and each qualifying child before they file their return. For most people, the due date of the return is April 15, 2020. Most taxpayers can extend the due date for their 2019 tax return to Oct. 15, 2020, by filing an automatic extension request with the IRS by the April 15 deadline. There are special rules for those in the military or for those out of the country.
 
Refund timing for EITC and ACTC filers
By law the IRS cannot issue refunds before mid-February for tax returns that claim the EITC or the Additional Child Tax Credit (ACTC). The IRS must hold the entire refund — even the portion not associated with EITC or ACTC. This helps ensure taxpayers receive the refund they deserve and gives the agency more time to detect and prevent errors and fraud.
 
Where’s My Refund on IRS.gov and the IRS2Go app will be updated with projected deposit dates for most early EITC/ACTC refund filers by Feb. 22. So EITC /ACTC filers will not see an update to their refund status for several days after Feb. 15. The IRS expects most EITC or ACTC related refunds to be available in taxpayer bank accounts or on debit cards by the first week of March, if they choose direct deposit and there are no other issues with their tax return. Check Where’s My Refund for your personalized refund date.
 
Avoid errors
Taxpayers are always responsible for the accuracy of their own return, even when someone else prepares the return. Because the EITC is complex, many people claiming it make mistakes. Workers should get help if they are not sure if they qualify. Common errors include:
  • Claiming a child who does not meet all four tests for a qualifying child: age, residency in the U.S., relationship and joint return.
  • Filing as single or head of household when married.
  • Reporting incorrect income or expense amounts.
  • Missing or incorrect SSN for self, spouse or qualifying children.
Claiming the EITC in error can have lasting impact
Filing a tax return with an error on the EITC claim can:
  • Delay the EITC part of the refund until the IRS corrects the error. The delay can take several months.
  • Cause the IRS to deny all or part of the EITC. If this happens, the taxpayer:
    • Must pay back the amount of EITC paid in error plus interest.
    • May need to file the Form 8862, Information To Claim Certain Credits After Disallowance, to claim the EITC again.
    • May be banned from claiming EITC for the next two years if the error is because of reckless or intentional disregard of the rules.
    • May be banned from claiming EITC for the next ten years if the error is because of fraud.
Workers should help their preparers file a return correctly
When a taxpayer pays someone to prepare their return, the preparer and the firm he or she works for have additional responsibilities to make sure the return is correct. Expect any preparer, whether paid or not, to ask many questions. Help your preparer by answering all questions and by bringing all the documents the preparer needs to get the return correct. Find out what documents to bring by visiting irs.gov/eitc.

How to claim the EITC
To claim the EITC, taxpayers need to file a Form 1040. If the taxpayer is claiming the EITC with a qualifying child, they must also complete and attach the Schedule EIC to the tax return. Schedule EIC provides the IRS with information about a qualifying child or children, including their names, ages, SSNs, relationship to the taxpayer and the amount of time they lived with the taxpayer during the year.
 
Letter from the IRS
In some cases, a taxpayer may receive a letter from the IRS requesting additional information. To avoid further refund delay, they should respond promptly. If more time is needed for a complete response, or if the taxpayer needs help, it is important they call the phone number on the letter.  For further tips on responding to these letters, go to irs.gov/eitc for the section on Received a Notice.

How to get free tax help
Taxpayers can see if they qualify for EITC by using the EITC Assistant tool on IRS.gov. Find information on who qualifies, how to claim, and more at irs.gov/eitc.
Those who may qualify for EITC should consider free tax preparation services. Many organizations provide free tax return preparation at thousands of volunteer sites nationwide for those with income below $56,000 and for senior or disabled taxpayers.
The Volunteer Income Tax Assistance (VITA) program offers free tax preparation for low- to moderate-income taxpayers. To find a nearby VITA site, taxpayers can use the VITA/TCE Locator Tool at irs.gov/vita.
Tax Counseling for the Elderly (TCE) offers priority assistance to people who are 60 years of age and older. To find a TCE site, taxpayers can visit the AARP locator web page.
Active duty military members and their families can receive free tax preparation assistance at VITA sites within their installations. The volunteers can address military-specific tax issues.
EITC-eligible workers can also use the free tax preparation and electronic filing program, IRS Free File, available only at irs.gov/freefile. Free File is a public-private partnership that provides a free way to do a federal tax return either by using brand-name software or online fillable forms. Free File software is available now to millions of individuals and families that earn $69,000 or less. Some Free File partners also offer free state tax return filing.
Outside of IRS Free File, many other e-file software providers and tax professionals also provide free services for low-income taxpayers.

EITC and other benefit programs
Refunds received from the EITC, or any other tax credit, are not used to determine eligibility for any federal or federally funded public benefit program such as Medicaid, Supplemental Security Income (SSI), Supplemental Nutrition Assistance Program (food stamps), low-income housing or most Temporary Assistance for Needy Families (TANF) payments. Those who save their tax credit for more than 30 days should contact their state, tribal or local government benefit coordinator to find out if their benefits count as assets.
Unemployment benefits are not earned income and can’t be used to claim the EITC. But they are taxable income and may affect the amount of EITC a person may get.

Qualify for EITC?
See what other tax credits may be available.
Related items:
  • EITC Home Page
  • IRSvideos, available on YouTube, provide information about credits, deductions and tax law changes. The IRS also has videos in Spanish and American Sign Language.
  • IRS audio files, informal tax messages in English and Spanish, can be used for podcasts or to play on a portable device.
  • Publication 596, Earned Income Credit, offers a detailed overview of the EITC, the eligibility rules and instructions on how to claim it.
@IRSnews and @IRSenEspanol, the IRS Twitter news feeds, provide the latest federal tax news and information for taxpayers in English and Spanish

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