[Nfbf-l] Overlooked tax credit could pay off for you

[Sherri]

This is interesting and might be helpful to those of you who pay income tax, which I'm sure are many of us.
Sherri
 
orlandosentinel.com/features/os-earned-income-tax-credit-help-20100303,0,5436120.story

OrlandoSentinel.com
Overlooked tax credit could pay off for you
Earned Income Tax Credit worth up to $5,657 -- but isn't taken by quarter of those who qualify, IRS estimates
By Kate Santich, Orlando Sentinel

11:24 PM EST, March 4, 2010

 If there's a bright spot in the recession, it's that more people will get money back from the IRS this year through an often-overlooked tax credit.

If you were laid off during 2009, worked for minimum wage, had a temporary or part-time job - heads up, particularly if you have children younger than 18 to support. Unlike many types of write-offs, the Earned Income Tax Credit could bring you a refund of more than you paid in federal taxes.

"Too many people just don't know about it," said Brittany Richards, senior manager of community investment for Heart of Florida United Way, which has launched a campaign to educate people about the credit and the availability of free tax-preparation sites in Central Florida. "The IRS estimates that, on average, one in four filers nationally failed to claim the credit."

That's because a lot of people who don't make much money don't bother to file a tax return - but you can't get the credit unless you do. Richards and Catherine Tucker, deputy director of Orange County's Legal Aid Society, which is helping people file their returns free, recently answered some frequently asked questions about the credit and how to get it:

How much money can people get through this program?

The Earned Income Tax Credit - also known as the EITC or simply the Earned Income Credit - varies with your income, whether you're single or married and how many qualifying children you have. But the maximum for someone with three or more children is $5,657. For a single person with no children, the maximum is $457. For tax year 2008, that added up to $422 million for people in Orange, Osceola and Seminole counties.

Generally speaking, who qualifies?

Those with an adjusted gross income of less than $43,279 if they're single parents or $48,279 for a married couple filing jointly with three or more children. You also must have a valid Social Security number, be a U.S. citizen or resident alien, have earned some income and cannot have more than $3,100 in investment income. Further, your filing status cannot be "married filing separately" and you can't file Form 2555 or 2555-EZ (which is for people earning foreign income). If you don't have a qualifying child, you have to be at least 25 years old but younger than 65.

So the more a person makes, the bigger the EITC?

No. If you make a graph of income and the earned-income credit, it actually looks like a bell curve. The people making the least and most amounts get the smallest credit. It's the people in the middle who get the most.

I didn't work at all last year, but I got unemployment compensation. Does that count as income?

Sorry, no. Neither do Social Security payments. Typically, this only involves income from a job - even if you're self-employed.

I only paid a small amount in federal taxes last year. Is it worth it to file?

Yes. Remember, it is possible to get back more than you paid in. And in any event, if you didn't earn enough to owe any taxes, you would get back whatever federal taxes were deducted from your paycheck plus whatever EITC you are eligible for.

Why would the government do this?

It's sort of like the write-offs people get for mortgage-interest payments and donations to charity. But in this case, instead of the government encouraging homeownership or philanthropy, it is encouraging people to work, even if they don't earn very much.

If I had known about this, I would have filed for it last year. Is it too late?

A. No. In fact, you can file for up to the previous three years if you didn't claim the EITC and believe you're eligible. If you didn't file at all, you can do so now, or if you filed but didn't claim the credit, you can file an amended return.

My W-2 says something about an "advance EITC payment." What's that?

Your employer may have asked whether you expected to qualify for the credit last year. If so, you already may have received the EITC payments in your paycheck. Unfortunately, in some cases, people are paid more than they ultimately qualify for - and so they wind up actually owing the IRS money.

What about these free-tax-preparation sites?

A. There are 32 volunteer tax-preparation sites throughout Orange, Osceola and Seminole counties that will prepare your tax return for free if you made less than $50,000 last year. At a few of them - specifically, those operated by AARP - you can have a volunteer prepare your taxes even if you made up to $100,000. For a list of sites, go to hfuw.org.

What if I want to file myself?

The IRS has a lot of information at IRS.gov.

Kate Santich can be reached at ksantich at orlandosentinel.com or at 407-420-5503.

Copyright © 2010, Orlando Sentinel

 
Sherri Brun, NFBF Secretary and Newsline® Coordinator
E-mail:  flmom2006 at gmail.com
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