There's a popular tax break out there that paid more than 26 million workers a total of nearly $59 billion last year. Yet as many as 1 in 4 of those who qualify for this tax credit failed to claim it, missing out on hundreds, or even thousands, of dollars.
That break is the earned income tax credit. Designed to help low- and middle-income wage earners make ends meet, the credit helps reverse the effect of payroll taxes. Despite the best efforts of community organizations and various government agencies, however, the credit doesn't reach some of the families who need it most.
What You Need to Know
The earned income tax credit covers families of various sizes, with different income limits and credit maximums. Joint filers with three or more children are eligible if they earn less than $49,000, with a maximum credit of about $5,750. Smaller families have slightly lower income limits and credit amounts, and even if you don't have any children, you may be entitled to up to $464 if you earn $13,660 or less and are single or $18,740 for married couples.
The key to the earned income tax credit is that you have to have income from a job or business. Interest and dividends, Social Security payments, and unemployment benefits don't count for claiming the credit.
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But what many don't realize is that you can get cash back from the credit even if you don't owe tax. That's unusual for a credit, but it's what makes the earned income tax credit especially valuable for those who are struggling to make ends meet.
The problem with the credit is that it's fairly complicated, with various rules that can make it hard to figure out if you're actually eligible. But with that in mind, the IRS set up a quick eligibility quiz. Of course, many low-income taxpayers don't have access to computers, so getting everyone eligible to claim the credit will continue to be difficult.
Get What You Deserve
So be sure to check and see if you're eligible for the earned income tax credit. In tough times, some extra money can make all the difference.