The Earned Income Credit
The Earned Income Credit (EIC) is a special tax benefit for working people who earn low or moderate incomes. Workers who qualify for the EIC and file a federal tax return can get back some or all of the federal income tax that was taken out of their pay during the year. They may also get extra cash back from the IRS. Even workers whose earnings are too small to have paid taxes can get the EIC, and the EIC reduces any additional taxes that workers may owe.
Working couples making less than $34,178 and individuals making less than $33,178 may find they now qualify for the Earned Income Credit. Enacted by Congress in 1975 and administered by the Internal Revenue Service (IRS), the EIC is also meant to offset social security and other living expenses. For the tax year 2002, single or married people who worked full or part time at some point in 2002 can qualify, depending on their income. Who qualifies:
- Families with two or more children who earn less than $33,178 ($34,178 if married filing jointly) are eligible for a credit of up to $4,140;
- Families with one child who earn less than $29,201 ($30,201 if married filing jointly) are eligible for a credit of up to $2,506;
- Workers without a qualifying child who earn less than $11,060 ($12,060 if married filing jointly) are eligible for a credit of up to $376.
"Qualifying children" include: sons, daughters, stepchildren, grandchildren, adopted children and foster children , as long as they lived with the worker for more than half a year. Qualifying children must have valid social security numbers and must be under the age of 19 ore under the age of 24 if they are full-time students.
To get the Earned Income Credit, workers raising children in 2002 must file either Form 1040 or 1040A and fill our and attach Schedule EIC. Workers who were not raising children in 2002 can file any tax form including the 1040EZ and write EIC or the Dollar amount on the Earned Income Credit line.
The Child Tax Credit
This year many low income families will be eligible for the Child Tax Credit. The Child Tax Credit (CTC) is a federal tax benefit worth up to $600 this year for each dependent child under the age 17. In 2002, even families that earned too little to owe income tax can get the credit. They will receive all or part of their CTC in the from of a refund check from the IRS. Moreover, this credit is in addition to any Earned Income Credit for which the family qualifies. Most low-income working families will qualify for both credits.
To be eligible for the Child Tax Credit:
- a single or married worker must be able to claim an exemption for a dependent child under the age 17 on their tax return;
- have a taxable earned income above $10,350;
- have either a Social Security number or and Individual Taxpayer Identification number.
The Child Tax Credit is calculated differently than the Earned Income Credit, and requires that you fill out a special form 8812 to receive the credit. Most families will need assistance in completing the tax forms for the CTC. If available, free tax filing assistance through VITA (volunteer Income Tax Assistance) will be important to most families.
VITA (Volunteer Income Tax Assistance)
VITA is a program of the IRS which helps people fill out their tax forms for free. Sites are available in some Kentucky communities. To find a VITA site near you, call 1-800-829-1040. Be patient, the 24-hour line is often busy. You might also contact the IRS Territory Manager, Vickie Fairley for a VITA site near you.
VITA can help save taxpayers costly commercial tax preparation fees as well as fees charged to provide a quick turn around.