For Immediate Release
Everywhere, USA – Workers may get a larger tax refund this year because of the Earned Income Tax Credit, but you must file a tax return to claim it! Tomorrow, January 26, 2018, is Earned Income Tax Credit Awareness Day, a nationwide effort to increase awareness about EITC and free tax preparation sites.
What is the EITC? The Earned Income Tax Credit is an anti-poverty measure administered through the tax system to low and moderate income families with children. For some families, this credit can represent up to a third of their total income for the year.
Who is eligible? The Earned Income Credit can be claimed by parents or legal guardians only. CPS placements, Powers of Attorney, or other informal arrangements are not good enough. There are also residency, citizenship, and support requirements. A reputable tax preparer will be able to analyze your situation to ensure you qualify.
Some parents believe that the credit is theirs to give away and allow a relative or friend claim their child. This is not allowed and is considered fraud. The EITC is actually attached to the child and only a parent or legal guardian is allowed to claim it. This situation is most common when parents live with family or friends that have helped them provide support to their children. The IRS has become much more efficient and diligent in catching this fraudulent use of the EITC. They will audit and the person who unlawfully claimed the credit will have to pay it back along with penalties and interest. This can even lead to the parent being banned from taking the credit for a period of up to ten years.
Some parents with custody arrangements agree to let the noncustodial parent claim some benefits related to the children. While this may apply to the dependency exemption or the child tax credit, it does not apply to the EITC.
If you are self-employed and claiming the EITC, it is crucial that you maintain records of your income and business expenses. The IRS audits self-employed people at a higher rate than employees because of the greater potential for fraud.
People with no children can also claim the EITC! However, if you’re filing as single, you must make under $15,010 annually or less than $20,600 if filing jointly with your spouse. You also still have to meet the general EITC rules; you can’t be someone else’s dependent and you have to be between the 25 and 65 years of age.
The IRS can audit you for the past three years or even longer if there is a reasonable belief that there is fraud involved. Remember that if you sign a tax return, you are agreeing that everything on it is correct. If there are fraudulent items on your return, you will be held responsible. Don’t be fooled by tax preparers who promise to get you a higher refund – your refund should only reflect what you are actually eligible for.
Do research on your tax preparer and make sure they are reputable. If you make less than $55,000 a year, you are eligible for free tax preparation assistance through the IRS’s Volunteer Income Tax Assistance programs. You can find one in your area by going to www.irs.gov/vita or by calling 800-906-9887. The AARP also runs a Tax Counseling for the Elderly program for people 60 and over. These programs are staffed by trained volunteers. Most people who make under $55,000 have fairly simple returns, so you should not be paying hundreds of dollars for tax preparation.
Visit our Low Income Taxpayer Clinic‘s page for more information on how we can help as well as other resources and IRS tax tips.
Lone Star Legal Aid is a 501(c)(3) nonprofit law firm focused on advocacy on behalf of low-income and underserved populations. Lone Star Legal Aid serves the millions of people at 125% of federal poverty guidelines that reside in 72 counties in the eastern and Gulf Coast regions of Texas, and also 4 counties of southwest Arkansas. Lone Star Legal Aid focuses its resources on maintaining, enhancing, and protecting income and economic stability; preserving housing; improving outcomes for children; establishing and sustaining family safety and stability, health and well‐being; and assisting populations with special vulnerabilities, such as those who have disabilities, or who are elderly, homeless, or have limited English language skills. To learn more about Lone Star Legal Aid, visit our website at www.lonestarlegal.org.
Media contact: Clarissa Ayala
