How to Get a Bigger 2017 Tax Refund with the Earned Income Tax Credit
Earned Income Tax Credit: What You Need to Know
For most people, tax season is complicated and overwhelming. For others, they have been organizing and prepping for this season for months. Regardless of which type of tax filer you are, there’s always time to find new ways to get more of your hard-earned money back from the government. January 27 is Earned Income Tax Credit Awareness Day, so we decided to focus on this specific way to help you walk away from tax season with an even bigger refund check.
Am I missing out on the Earned Income TaxCredit (EITC)?
As many as 1 out of 5 people do not receive this benefit, even though he or she would qualify. The EITC is annually available from the federal government to help low-to-moderate-income families and individuals. This tax credit has proven to help workers, children, and the community alike. While criteria vary, the Earned Income Tax Credit application and process is not as complicated as it may sound.
What is the Earned Income Tax Credit exactly?
Are you living the so-called “American Dream?” You know, you’re working hard, raising kids, and buying a home simultaneously? If so, the EITC might be a great fit for your tax return. The Earned Income Tax Credit is a refundable tax credit for working individuals that fall into the category of low-to-moderate-income. The EITC is a federal tax credit designed to help workers keep more of their incomes each year. This credit can be refunded to both individuals, couples, and especially people with children. The number of children an individual or couple has is a large determining factor for the amount of money he or she can earn back.
But first, how is ‘earned income’ defined?
Earned income is defined as any money you were paid for doing work. This can be from your own efforts, and/or, work done by another member of your household. Examples include salaries, wages, tips, commissions, union strike benefits, royalties, jury duty payment, and a few others. The list does not include payments like alimony, child support, unemployment benefits, retirement income, or pension payments. Make sure to have your income predetermined before you seek to utilize the EITC because there are strict earning caps.
Eligibility is for low-to-moderate-income families.
According to the IRS, in 2016, more than 27 million eligible workers and families received more than $67 billion through the EITC; with an average EITC amount of about $2,455. Eligibility for the Earned Income Tax Credit is based on various criteria that all have to be met each year, for each individual or family unit. Couples are able to file together, but will have to disclose their relationship, number of children, and a list of other sources and types of income.
So why would the government give me all of this money?
It may seem like you are just living your life and paying your bills, but the government understands there isn’t much leftover for saving or spending once all is said and done. The tax refund boost generated by taking advantage of the EITC is designed to stimulate low-to-moderate-income brackets, families, and communities. However, it is a common tax credit that is often overlooked. Why is that? Well, many people file their own taxes and aren’t aware of the credit, plus some people do not file at all because their income is low enough they are not required to file. In both instances, a larger refund is often being left on the table.
Every year the EITC eligibility requirements change.
Furthermore, every year’s criteria, numbers, and eligibility differ. There are a variety of resources that will provide you with easy access to this evolving information. While the criteria may differ, as long as you are within the low-to-moderate-income bracket, you could qualify for some sort of increased 2017 tax refund. What will differ is the amount of money you receive. While the EITC isn’t necessarily a numbers’ game, the eligibility requirements change with the economy.
There are available calculators and software tools.
As mentioned before, there are various tools that can help you find your Earned Income Tax Credit eligibility, review the criteria, and apply. Professionals who specialize in this field are the most helpful, but so are various online software programs. Be sure to double check various sources to ensure you are maximizing your refund this tax 2017 season. There are also calculators online that will give you an estimate on the amount of money you can expect with the changing eligibility.
What does 2017 look like for you?
According to the IRS, here is the breakdown of income versus return:
EITC is for workers whose income does not exceed the following limits in 2016:
- $47,955 ($53,505 married filing jointly) with three or more qualifying children
- $44,648 ($50,198 married filing jointly) with two qualifying children
- $39,296 ($44,846 married filing jointly) with one qualifying child
- $14,880 ($20,430 married filing jointly) with no qualifying children?
- ** Investment income must be $3,400 or less
Make sure to take your time reviewing your options and asking questions.
Don’t overlook the EITC.
The downside to the Earned Income Tax Credit is that people tend to either not know about it, or, assume they make too much. Some of the tax filers most at risk for overlooking the EITC, and not receiving any benefits, are:
- Single, childless individuals
- Non-traditional families
- Workers with limited English skills
- Individuals with disabilities or are caring for children with disabilities
- People in rural areas
Don’t qualify now? Keep this in mind.
While there is a list of individuals who will more than likely overlook this benefit, another group of tax filers do not currently qualify, but may in the future. Life is always changing, as well as the social and economic status of the country. Politicians enact different eligibility requirements in order to stimulate the economy. The EITC has proven to change with the times, but has continuously benefited taxpayers from all walks of life. You may not qualify now, but you may in the future. So, keep these different eligibility requirements in mind each year as you sit down with your accountant.
At LSB, we want you to make this tax season count. Do not underestimate the amount of money Uncle Sam may have waiting for you. If you seem to match the snapshot of the criteria provided in this article, be sure to ask your tax preparer for further information about the EITC.
This blog is provided for informational purposes only. Consult your tax advisor regarding whether the Earned Income Tax Credit applies to you.
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