What is the Earned Income Tax Credit?

The balance that a person (natural or legal) has in his favor and can deduct when making his tax return is known as a tax credit. There are many types of tax credits, below we will explain what is the Earned Income Tax Credit o Earned Income Tax Credit.

What is the Earned Income Tax Credit?

The Earned Income Tax Credit (EIC) is a refundable tax credit for low- and moderate-income workers. The amount of the credit will depend on your income and the number of children you have, although people without children may also qualify. For tax year 2019, the earned income credit ranges from $529 to $6,557. For 2020 it is from $538 to $6,660.

If you are within the limits of the credit, remember to include it on your tax return. According to him I.R.S.if you did not request the Earned Income Tax Credit (EIC) when filing the taxes of the last three years, but you think you qualify for it, you must indicate it in order to recover the money.

Here are some important facts about the Earned Income Tax Credit (EIC) :

  • For fiscal year 2019, the Earned Income Tax Credit It ranges from $529 to $6,557, depending on your marital status and the number of children you have.
  • For fiscal year 2020, the Earned Income Tax Credit It ranges from $538 to $6,660, depending on your marital status and the number of children you have.
  • It is not necessary to have a child to apply for the Earned Income Tax Credit.
  • The Earned Income Tax Credit not only does it reduce your tax amount, it allows you to get a refund. In some cases, this refund may be more than what you actually paid in taxes.

How to qualify for the Earned Income Tax Credit

In addition to staying below the income thresholds noted above, there are other qualification rules and requirements. Here are the big eligibility rules:

  • You should have at least one dollar of earned income (pensions and unemployment do not count).
  • Your investment income in 2019 must be $3,600 or less (rising to $3,650 in 2020).
  • You can’t claim the Earned Income Tax Credit if you are married and you file separately.
  • You do not need to file Form 2555 for Foreign Earned Income; or Form 2555-EZ, Foreign Earned Income Exclusion.

Note: There are special EIC rules for members of the military and clergy, as well as for people who have disability income or who have children with disabilities.

How much can I get?

Below are the Earned Income Credit Maximum Amounts Available for Tax Year 2019plus the maximum you can earn before losing the benefit entirely.

Number of children Maximum personal income tax credit maximum earnings,

single or heads of family

maximum earnings,

joint filers

0 $529 $15,570 $21,370
one $3,526 $41,094 $46,884
two $5,828 $46,703 $52,493
3 or more $6,557 $50,162 $55,952
  • Both your earned income and adjusted gross income must be below the levels in the table.
  • In general, the less you earn, the higher the earned income credit or Earned Income Tax Credit.
  • Your earned income generally includes wages from work, wages, tips, and other taxable payments you receive from your employer. Your adjusted gross income is your earned income minus certain deductions..

Earned Income Tax Credit in 2020

(for taxes due in April 2021)

Number of children Maximum personal income tax credit maximum earnings,

single or heads of family

maximum earnings,

joint filers

0 $538 $15,820 $21,710
one $3,584 $41,756 $47,646
two $5,920 $47,440 $53,330
3 or more $6,660 $50,954 $56,844

Children and the Earned Income Tax Credit (EIC)

If you claim one or more children, each must pass certain tests to qualify:

  • The child can be your son, daughter, adopted child, stepson, or grandchild. The child can also be your brother, sister, half-brother or half-sister, stepbrother or stepsister or any of their children, also your nephew or niece.
  • Must be under the age of 19 at the end of the year and younger than you or your spouse if you are filing jointly. You must be under 24 years of age if you are a full-time student. There is no age limit for disabled children.
  • The child must have lived with you or your spouse in the United States for more than half the year.

For each child you claim, you will also need:

  • A social Security number (Be sure to use the child’s name and social security number exactly as they appear on the social security card.)
  • Your date of birth.

The Earned Income Tax Credit when you don’t have children

You may be able to get the EIC if you don’t have children, but meet the income requirements for your filing status.. To qualify, you must meet three conditions:

  1. You must have resided in the United States for more than half of the year.
  2. No one can claim you as a dependent or qualifying child on their tax return.
  3. You must be at least 25 years old but under 65 at the end of the year.

Consequences of an Error Related to the Earned Income Tax Credit (EIC)

An error on your tax form not only delays your EIC refund (sometimes for several months), but the IRS could deny you the credit.

If the IRS denies your entire application for Earned Income Tax Credit (EIC):

  • You must pay back any EIC amount that was paid to you in error, plus interest.
  • You may need to file Form 8862, “Information to Claim Earned Income Credit After Disallowance,” before you can claim the EIC again.
  • you could prohibit claiming the EIC for the next two years if the IRS believes you filed with “reckless or intentional disregard of the rules.”
  • You could be barred from claiming the EIC for the next 10 years if the IRS believes you fraudulently filed your return.

Most tax programs guide you on the Earned Income Tax Credit (EIC) by asking a series of questions that greatly simplify the presentation process. Also, if you qualify for the EIC, you could get free tax software. Remember: Even if someone else prepares your return for you, the IRS holds you responsible for all information reported.

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