Who wouldn’t want an extra $300 or even $3,000 in tax refund cash? But oddly enough, millions of Americans miss out on this deal each year.
The Internal Revenue Service estimates that nationwide only four out of five of eligible workers claim and get their Earned Income Tax Credit. So roughly 20% who qualify don’t get their money, leaving billions of dollars going unclaimed.
It’s money that’s based on what you earned in 2019 typically when working a lower-wage job. The dollar amount that households receive will vary significantly and depend on your pay, filing status, as well as the size of your family.
“Taxes were always scary to me. It wasn’t something I wanted to deal with,” said India Bell, 50, who lives in Detroit and has two teenagers.
But Bell tells everyone she knows about why they should file a tax return to qualify for the Earned Income Tax Credit.
“I’m not a social media person,” she joked. “But I’m good with my mouth.”
Bell was part of the annual media awareness program held in Detroit to get word out about the EITC.
The IRS message: “You earned it. Now file, claim it and get it.”
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Many times, people aren’t even aware that the earned income tax credit exists. The IRS notes that one-third of the EITC population changes each year.
Tax filers can move into and out of eligibility due to changes in their martial status, the age of their children and how much money they’re making on job.
Several years ago, Bell was able to get her taxes done for free at a tax preparation site offered through Wayne Metropolitan Community Action Agency and she realized then that as a single working mother, she qualified for the Earned Income Tax Credit. Bell made less than $25,000 in 2018 working at a Synod Community Services adult foster care home in Oakland County.
And she said she qualified for about $5,600 through the Earned Income Credit.
She was able to pay off some credit card bills, pay off an old bill before it went into debt collection and take a mini-vacation to Mackinac Island in Michigan last summer.
This year, “I want to pay off a credit card and consolidate a couple of others and do repairs on my garage,” she said.
And if there’s enough money, she’d like to take a trip to Atlanta.
How do I know if I qualify?
You must have some earned income from a job and meet other requirements, including income limits. Your investment income can only be $3,600 or less for the year.
The IRS notes: “You cannot use any income received for work performed while an inmate to claim EITC. This includes amounts for work performed while incarcerated, in a work release program, or while in a halfway house.”
Both your earned income and your adjusted gross income must be no more than $41,094 if you have one qualifying child and are single. For a married couple filing jointly, the limit would be $46,884 with one child on 2019 tax returns.
The more children you have, the higher the income limit. The top income limit is $55,952 for a married couple filing a joint return with three or more qualifying children.
A single person with no children could qualify with an income that’s $15,570 or lower.
The maximum earned income tax credit is $6,557 on 2019 tax returns but to receive that level the tax filer would need three or more qualifying children.
Nationwide, about 25 million eligible workers and families received about $63 billion in EITC.
How much money can I get?
The average amount of EITC received last year nationwide was about $2,476.
It is a refundable tax credit, meaning that you can get more back from the federal government than you paid in taxes. But amounts vary considerably.
The maximum credit is $529 for those with no qualifying children but goes up to $3,526 for those with one child.
The maximum credit is $5,828 for filers with two qualifying children and $6,557 for those with three or more children.
The IRS notes that the EITC credit ranges from:
- $11 to $6,557 with three or more qualifying children
- $10 to $5,828 with two qualifying children
- $9 to $3,526 with one qualifying child
- $2 to $529 with no qualifying children
More than half of the states in the USA also have some type of Earned Income Tax Credit in addition to the federal credit.
How do I know if my child would qualify?
Among other requirements, the child must be under age 19 at the end of the year and younger than you or your spouse, if you file a joint return.
Or the child can be a full-time student in at least five months of the year and under age 24 at the end of the year and younger than you or your spouse, if you file a joint return.
Or the child may be permanently and totally disabled at any time during the year and any age.
Also, the child must have lived with you, or your spouse if you file a joint return, in the United States for more than half of the year. Various relationships can work including a grandchild or sibling.
The IRS web site at www.irs.gov also has a EITC Assistant to help you figure out if you qualify for the Earned Income Tax Credit.
Is the Earned Income Tax Credit too complicated for me to file?
You typically can get help. See IRS “Free File” for free software that covers those with the Earned Income Tax Credit.
You may also call 800-906-9887 for the IRS hotline for information on Volunteer Income Tax Assistance and Tax Counseling for the Elderly sites. You also can search sites at www.irs.gov.
How long do I have to wait for the money?
If you claim the Earned Income Tax Credit or the Additional Child Tax Credit on your tax return, the IRS cannot issue your refund before mid-February. In addition, the three-day holiday weekend involving President’s Day affects the refund timing.
The IRS said it expects tax refunds that include money from the first earned income and additional child tax credits to be available in taxpayer bank accounts or on debit cards by the first week of March, if they chose direct deposit and there are no other issues with their tax return.
You can check Where’s My Refund for your personalized refund date.
And remember, the law requires the IRS to hold the entire refund — even the portion not associated with the earned income credit.
In addition, some tax refunds may be held back beyond the February date if the IRS has questions on the return.