You
May Qualify for the Earned Income Tax Credit or EITC
The Earned Income Tax Credit is a federal initiative
approved by Congress in 1975 to help direct money
back to low- to moderate- income earners.
To qualify for the credit and free tax preparation, an individual
with two or more children must have an income less than $34,458.
An individual with one child must have an income less than
$30,338.
And a person or family without children must have an income
less than $11,490. These amounts are each $1000 higher if
a married couple files a joint return.
Children can include step-children, grandchildren, foster
and adopted children and siblings if the taxpayer is the
primary care giver.
The maximum tax credit a family could receive is $4,300.
Taxpayers and tax professionals should review the rules
before attempting to claim the EITC.
Do You Qualify For EITC?
To qualify, you must meet certain requirements and file a
U.S. Individual Income Tax Return. As described below,
some EITC rules apply to everyone. There are also special
rules for people who have children and for those who do
not.
Individuals And Families Must Meet Certain general requirements:
> You must have earned income.
> You must have a valid Social Security Number for yourself,
your spouse (if filing jointly) and your qualifying child.
> Investment income is limited to $2,650.
>
Your filing status cannot be “married filing separately”.
> Generally, you must be a U.S. citizen or resident alien all
year.
> You cannot be a qualifying child of another person.
> You cannot file Form 2555 or Form 2555-EZ (related to foreign
earned income.)
Your income cannot exceed certain limitations:
For Tax Year 2004, you must have adjusted gross income of
less than:
> $34,458 ($35,458 if married filing jointly) with two or more
qualifying children.
> $30,338 ($31,338 if married filing jointly) with one qualifying
child.
> $11,490 ($12,490 if married filing jointly) with no qualifying
children.
If you claim a child, they must meet three eligibility tests:
Residency Test — The child must
have lived with you in the United States for more than
half of 2004.
Relationship Test - The child must be your:
Son, daughter, stepchild or a descendant of any of them,
or;
Sister, brother, stepsister, stepbrother or any of their
descendents who you cared for as your own child, or;
A foster child who was placed with you by an authorized placement
agency and who you cared for as your own child.
An adopted child placed with you for adoption by an authorized
placement agency.
Age test - At the end of 2004, the child must have been under
age 19, a full-time student under age 24 or any age if permanently
and totally disabled at anytime during 2004. Your qualifying
child cannot be used by more than one person to claim EITC.
If a child meets the rules to be a qualifying child of more
than one person, only one person can treat that child as
a qualifying child and claim EITC.
If you don’t have a child, you must meet three additional
tests.
Earned income credit has no effect on certain welfare
benefits. Any refund you receive because of the EIC and any
advance EIC payments you receive will not be considered
income when determining whether you are eligible for the
following benefit programs, or how much you can receive
from these programs. However, if the amounts you receive
are not spent within a certain period of time, they may
count as an asset (or resource) and affect your eligibility.
>Medicaid and supplemental security
income (SSI)
>Food stamps
>Low-income housing
At the end of 2004, you must have been at least age 25,
but under age 65.
You cannot qualify as the dependent of another person.
You must have lived in the United States for more than half
of 2004.
Credit Limits for 2004 Tax Year
Income and family size determine the amount of the EITC.
The Earned Income Credit Table, which shows the credit
amounts, is included in the Instruction booklet for Form
1040 and in Publication 596, Earned Income Credit at IRS.gov.
For 2004, the maximum credit amounts are:
Two or more children — $4,300
One child — $2,604
No children — $390
>>>Current
Information For Earned Income Tax Credit 2006 [Click
Here]
>>>Apply For
Earned Income Tax Credit Online in 2006 [Click
Here]
Lois Center-Shabazz is the founder of MsFinancialSavvy.com
and author of the 3-time award-winning personal finance book,
Let's Get Financial Savvy! ISBN #0971979502.
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