Earned Income Tax Credit Awareness Day Could Save You Thousands
Have you heard of the Earned Income Tax Credit (EITC)? If not, you should take part in this annual event. Every year, people miss out on free tax credits by not claiming their EITC. Earned Income Tax Credit Awareness Day is a yearly event sponsored by the Internal Revenue Service (IRS) to help American taxpayers learn whether or not they qualify for this valuable tax benefit.
The EITC is the largest federal benefit program for working taxpayers, only 4 out of 5 eligible taxpayers claim their rightful EITC each year. That means that 20% of people who could be getting free money don’t!
Many people may not qualify one year, but may in the next. In fact, about 1/3 of the population able to claim the credit changes every year. In other words, just because you weren’t eligible last year doesn’t mean you won’t be this year–and vice versa.
Last year’s Awareness Day saw over 600 events, 15,000 assisted taxpayers and 57,000 people contacted via social media about the EITC.
Who qualifies for the EITC?
Taxpayers who are married and filing jointly with 3 or more children making $49,078 or less annually can still qualify for the credit. The tax credit adds up to nearly $6,000 from the IRS. With no qualifying children and no joint filing, the maximum income to qualify is $13,660 a year with a possible tax credit around a few hundred dollars. When you are trying to determine your eligibility, be sure you’re looking at your correct income bracket. Also, check to see if your city, county or state offers a separate EITC on top of the federal credit. States without a state-level income tax will not have an additional credit.
In 1997, there were fewer than 20 million American workers, and the EITC distributed a total of $30.4 billion. In 2011, over 26 million American workers earned nearly $59 billion in tax credits, with the average worker’s credit of $2,240.
California and Texas had the highest tax credits, with $6.48 billion given to qualifying taxpayers. However, Mississippi handed out the highest tax credit for the average, at $2,610.
Who is the EITC for?
The EITC is especially vital for workers living below the poverty line. This credit pulls 6.6 million people out of poverty each year. While other federal assistance programs do amazing work, the EITC has a wider reach and a bigger payout. Temporary Assistance for Needy Families served just fewer than 4.5 million people in 2011–17% of the number of people who received the EITC. Federal awards in 2009 nearly reached $21.8 billion–but that’s still only 1/3 of the EITC payout.
According to the IRS, several types of eligible people are at risk for missing the credit, including those with changed marital/parental status, Native Americans, disabled people/those with disabled children, and more.
21% of US children live in poverty, and they can be helped immensely when their qualifying parents claim the EITC. Families need to earn about twice the poverty-level income in order to support a family of four.