This article reflects tax law information for the 2013 tax year (January through December 2013) being used to file 2013 tax year returns during the 2014 filing season, which began January 31, 2014. The filing deadline for most individuals was April 15, 2014. Those unable to file by the deadline needed to submit Form 4868, giving them until Oct. 15, 2014 to complete their return. (Note that an extension provides additional time to file, but tax payments are still due by April 15, 2014.)
Q: What is the Earned Income Tax Credit (EITC)? A:
The Earned Income Tax Credit (EITC) is a refundable federal income tax credit for low- and moderate-income working individuals and families. The tax credit was passed by the U.S. Congress in 1975 to offset the burden of Social Security taxes and to provide an incentive for people to work. About a third of the people eligible for EITC changes every year, typically due to changes in family size, employment or marital status. Due to these life changes, some who previously didn't qualify for EITC may now qualify for the money-saving tax credit worth up to $6,044 for tax year 2013. Those eligible for tax year 2013 EITC include individuals and families with adjusted gross incomes less than: $14,340 ($19,680 if married filing jointly) with no qualifying children; $37,870 ($43,210 if married filing jointly) with one qualifying child; $43,038 ($48,378 if married filing jointly) with two qualifying children; or $46,227 ($51,567 if married filing jointly) with three or more qualifying children. Q: Who can claim the credit? A:
To claim the EITC on your federal tax return, you must follow certain guidelines. For example, you must:
• have a valid Social Security number;
• have earned income during the year;
• meet the income guidelines provided above; and
• be a U.S. citizen or a “resident alien” who has had this status all year.
To claim the EITC, your tax-filing status can be any filing status except “married filing a separate return.” Foreign earned income claimed on Form 2555 or 2555-EZ or investment income of more than $3,300 can disqualify you from eligibility for EITC. Check with the Internal Revenue Service (IRS) on these and other specific individual eligibility guidelines. Q: Who might I be able to claim as a qualifying child under EITC? A:
Basically, a qualifying child for EITC is a child who is your son or daughter (by birth or adoption), stepchild, foster child or descendant of any of them. For purposes of EITC, other qualifying “children” may include your brother, sister, stepbrother, stepsister, half brother, half sister or a descendant of any of them. Children must have lived with you in the United States for more than six months of 2013. As of Dec. 31, 2013, qualifying children must be either under age 19 or under age 24 and a full time student, or they must be permanently disabled. To qualify as a child under EITC, the child must also:
• be younger than the taxpayer claiming that child (unless the child is disabled); and
• not have filed a joint return except to claim a refund. Q: Can nontaxable military pay affect EITC? A:
Yes. Special rules apply for calculating earned income for U.S. military personnel serving in combat zones. Nontaxable pay for service members—noted on Form W-2, box 12, with code Q—is not considered earned income for EITC. However, you can elect to have your nontaxable combat pay included in earned income for computation of EITC. Electing to include nontaxable combat pay in earned income may increase or decrease your EITC, so calculate it both ways and choose the calculation that results in the larger amount of EITC. Electing to include the amount of nontaxable combat pay in the EITC calculation does not make the combat pay taxable for income tax purposes; it only affects the calculation of EITC. Q: Where can I go to get answers to other questions about my individual situation and eligibility? A:
Visit the official IRS website, www.IRS.gov, and use the search tool to find “Publication 596.” From the home page, you can also click on “Forms & Pubs” and choose “Publication 596” from the listing, or click on “I’ve got a question” and use the Interactive Tax Assistance search box to locate “EITC” information. You can also speak directly with an IRS representative at (800) 829-1040.
*Please visit www.IRS.gov
for specific information regarding the ability to claim EITC and the definition of a "qualifying child."
This “Law You Can Use” column was prepared by the Ohio State Bar Association (OSBA). It was provided by the Internal Revenue Service (www.IRS.gov).