January 26, 2024 by Clarissa Ayala
Earned Income Tax Awareness FAQs with Karyna Lopez, Litigation Director
UPDATE: CHECK OUT OUR LITC SERVICE PAGE FOR A LIST OF NEW TAXPAYER RESOURCES
In these FAQs, we explore the ins and outs of the Earned Income Tax Credit (EITC) with Karyna Lopez, Litigation Director, shedding light on eligibility criteria, recent regulatory changes, required documentation, and more.
How can I determine if I qualify for the EITC?
If you have a valid social security number, are a citizen or a resident alien, and have at least $1 of earned income, you may qualify for the EITC. Earned income is money you earn from working, either as an employee or for yourself. Earned income does not include social security, unemployment, pensions, alimony, or child support. You do not have to have children to get the credit. The amount of income you can have depends on your household size. You can answer some questions to see if you may qualify at https://apps.irs.gov/app/eitc, but the best way to be sure is to go to a reputable tax preparer. They will ask you many questions to determine if you qualify.
What are the key eligibility criteria for claiming the EITC?
The general rules for claiming the EITC are that a person who has a valid social security number is a citizen or resident alien for the entire year, and has at least $1 of earned income. However, the rules for claiming the EITC with children and without are different.
If you are claiming the EITC because you have children, those children must also have a valid social security number and be citizens or resident aliens. They also must be under the age of 19, under 24, and a full-time student, or any age and permanently disabled. They must be:
- related to you,
- Ex.Son, daughter, stepchild (if filing MFJ), adopted child, brother, sister, half-brother, half-sister, stepsister or stepbrother, grandchild, niece or nephew. You can also claim a foster child only if they have been placed with you due to a court order.
- live with you for more than half of the year, and
- not be married and filing a return with their spouse.
If you are claiming the EITC without a child, you have to make under $17,640 if you are single and $24,210 if you are married and filing jointly with your spouse. You must also not be claimed as a qualifying child by someone else, live in the United States for more than half the year, and be at least 25 but under 65. If you are married, at least one spouse must meet the age requirement.
Are there any recent changes or updates to EITC regulations that I should be aware of?
Yes, there are several recent changes.
The biggest change is that you can now claim the EITC under all filing statuses. In the past, married couples who did not live apart for more than half the year had to file using married filing jointly or married filing separate status. The EITC was not available if you filed separately, so spouses were forced to file together even if they did not want to or they would not receive the credit.
In the past, if anyone on the tax return lacked a valid social security number, they were ineligible for the EITC. Now, if the children claimed on a return do not have a valid social security number but the taxpayer does, they may qualify for the EITC for those without children.
What documents and information do I need to gather to prove my EITC claim?
You do not need to send any documents when you claim the credit. However, if you are audited, you will have to prove that you were eligible for it. Typically, you should be prepared to provide documents proving your relationship and residency. Examples would be birth certificates, rental contracts, doctor and school records, or court records. If you are contacted by the IRS, you should respond by the date specified in the letter, and always send any correspondence via certified mail.
Are there specific circumstances that may affect my eligibility for the EITC?
If you have previously claimed the EITC and the IRS denied it, you will need to file Form 8862, Information To Claim Certain Credits After Disallowance, for the year after your EITC was denied. If you do not include the form, your credit will be denied. If you filed your next return before your EITC from a prior year was denied, your next tax return will need to include the form. For example, if the IRS audits you in 2023 for your 2021 return, and determines you were not eligible for the credit, but your 2022 return was submitted and processed before that, you would include Form 8862 when you file your 2023 taxes in 2024.
If you claimed the EITC in a prior year and the IRS finds that the claim was based on fraud by you, you will face a ten-year ban on claiming it. If it was due to an intentional and reckless disregard of the rules, you will face a two year ban. After your ban is over, you must file Form 8862 to get the credit in the future.
Can the EITC be claimed retroactively for previous tax years if I did not claim it before?
You have three (3) years from the date a return was due to claim a refund, which includes your EITC. If you filed a return for a prior year not claiming the EITC and you want to claim it, you should file an amended return. Be careful about due dates as there were several filing extensions during Covid.
How can I ensure that I receive the full amount of EITC that I am entitled to?
While there are ways to figure out your credit by hand, most returns are done with software that automatically calculates your credit. You should answer all questions honestly, whether you prepare your return using online software or go to a tax preparer.
Are there any other tax credits or deductions that I should be aware of in conjunction with the EITC?
The Child Tax Credit is usually issued along with the EITC for households with children. It has the same rules as the EITC, but the child cannot provide more than half of their support. The Child Tax Credit is up to $2,000 per qualifying child and consists of two parts – a non-refundable and a refundable part. The non-refundable part reduces the amount of tax you have to pay. If your credit reduces your tax to $0 and you still have credit left, it becomes part of your refund. However, this is limited to $1600 per child. For example, if you owed a tax of $400 and were eligible for a $2,000 credit, your refundable part would be $1600. If you owe $0 in tax and were eligible for a $2,000 credit, you would also receive a $1600 refund.
If you do not qualify for the Child Tax Credit, you may qualify for the Credit for Other Dependents. This credit is $500 for each dependent. Your dependents can be of any age, be your parents, other relatives, or anyone else, and even live apart from you, as long as you provide more than half of their support. The dependent must be listed on your return, be a citizen, national or resident alien, and not qualify for the Child Tax Credit.
Earned Income Credit Awareness Day, observed on January 27TH, is designated to focus on promoting awareness and understanding of the Earned Income Tax Credit, emphasizing its benefits for eligible individuals and families.
Lone Star Legal Aid (LSLA) is a 501(c)(3) nonprofit law firm focused on advocacy for low-income and underserved populations by providing free legal education, advice, and representation. LSLA serves millions of people at 125% of federal poverty guidelines, who live in 72 counties in the eastern and Gulf Coast regions of Texas, and 4 counties in Southwest Arkansas. LSLA focuses its resources on maintaining, enhancing, and protecting income and economic stability; preserving housing; improving outcomes for children; establishing and sustaining family safety, stability, health, and wellbeing; and assisting populations with special vulnerabilities, like those with disabilities, the aging, survivors of crime and disasters, the unemployed and underemployed, the unhoused, those with limited English language skills, and the LGBTQIA+ community. To learn more about Lone Star Legal Aid, visit our website at www.LoneStarLegal.org.
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