Money The Government Wants Your Tax Client To Have
posted in Tax Preparation |Earned Income Tax Credit or EITC as the Internal Revenue calls it
is a special tax credit the U.S. government has provided for low income
and moderate income individuals. Another way of putting it is, it’s
money the government is giving your low-income wage earner tax
clients, as a bonus for working hard for a low wage.
The government has significantly curtailed welfare in the United States,
and minimum wage is far too often the norm for many hard working
unskilled Americans. The government has provided a financial windfall
or tax credit as it is called to make up for the huge disparity between
low-income wage earners and the high cost of living in the United States.
The problem is, many of them don’t understand how they can get money
back on their taxes they never paid in the first place, so many still do not
benefit from the earned income tax credit and millions of dollars sit in
the federal government coffers, unused.
Tax preparers still have time to give this tax credit to their low-income
wage earners, if they have already filed their taxes, you can file an
amendment for them. There are specific qualifications that MUST be met
in order for your clients to qualify for the earned income tax credit.
>Low-income wage earners MUST meet the following EITC
requirements to receive the credit:
The wage earner must have a valid Social Security Number
The wage earner must have earned income from employment or from self-employment.
The wage earner filing status cannot be married, filing separately.
The wage earner must be a U.S. citizen or resident alien all year, or a nonresident
alien married to a U.S. citizen or resident alien and filing a joint return.
The wage earner cannot be a qualifying child of another person.
>The wage earner can qualify if he or she has no children but, if he or she does
not have a qualifying child, he or she must:
Be age 25 but under 65 at the end of the year,
Live in the United States for more than half the year,
Cannot qualify as a dependent of another person
The wage earner cannot file Form 2555 or 2555-EZ (related to foreign earned income)
>EITC Thresholds and Limitations
Special rules may apply–Current Tax Year 2005
>Earned income and adjusted gross income (AGI) must each be less than:
$35,263 ($37,263 married filing jointly) with two or more qualifying children;
$31,030 ($33,030 married filing jointly) with one qualifying child;
$11,750 ($13,750 married filing jointly) with no qualifying children.
>Tax Year 2005 maximum credit (money that will be paid to the wage earner):
$4,400 with two or more qualifying children;
$2,662 with one qualifying child;
$399 with no qualifying children.
Investment income must be $2,700 or less for the year.
A “Qualifying Child” - A “qualifying child” may enable a taxpayer to claim
several tax benefits, such as head of household filing status, the exemption
for a dependent, the child tax credit, the child and dependent care credit
and the earned income tax credit. Prior to 2005, each of these items defined
a qualifying child differently.
If you have already filed for your clients taxes they are still eligible for the
Earned Income Tax Credit, you can file an amendment for your client.
Lois Center-Shabazz is the author of, Let’s Get Financial Savvy! ISBN#0971979502,
And editor of http://www.Msfinancialsavvy.com
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