IRS: 1 of 5 missing out on Earned Income Tax Credit
One of every five workers who are eligible for the federal Earned Income Tax Credit fails to take advantage of the credit, according to the IRS.
To help bridge that gap, the IRS is joining with partner organizations to promote Earned Income Tax Credit Awareness Day on Friday.
The EITC is earned by low- to moderate-income working people based on income, filing status and number of children and is “one of the strongest tools to help build financial self-sufficiency, keep people working and lead children into successful futures,” according to the United Way of Southwestern Pennsylvania, a local partner in the awareness campaign.
Taxpayers who qualify for and claim the credit could pay less federal tax, pay no tax or get a tax refund ranging up to about $6,300, according to the United Way.
Nationwide during 2017, about 27 million eligible workers and families received about $65 billion in EITC, according to the IRS. The average eligible taxpayer received about $2,445.
In Pennsylvania, based on a mid-year report in June, roughly 911,000 taxpayers filed successful EITC claims last year, receiving credits totaling $2.1 billion and averaging $2,262.
The annual EITC awareness campaign is in its 12th year. According to the IRS, the estimated rate of participation in EITC among eligible Pennsylvanians increased from 80.7 percent in the 2008 tax year to 82.6 percent in 2013 but slipped slightly to 82 percent in 2014.
To claim an EITC for the 2018 filing season, a worker's 2017 income may not exceed $15,010, with no qualifying children; $39,617, with one qualifying child; $45,007, with two qualifying children; or $48,340, with three or more qualifying children. The respective income limits for a married couple filing jointly are $20,600, $45,207, $50,597 and $53,930.
Investment income must be $3,540 or less. A child must meet certain relationship, age, residency and joint return requirements to be counted as a qualifying child.
According to the IRS, workers at risk for overlooking the EITC include those:
• Living in non-traditional homes, such as a grandparent raising a grandchild;
• Living in rural areas;
• Whose earnings declined or whose marital or parental status changed;
• Without children;
• With earnings below the federal tax return filing requirement;
• With limited English skills;
• Who are veterans;
• Who are Native Americans;
• Who have disabilities or are raising children with disabilities.
The Child Tax Credit (CTC) and Additional Child Tax Credit (ACTC) are other potential federal credits taxpayers with children may want to investigate.
The IRS cautions that taxpayers who claim an EITC in error could have their tax refunds delayed or denied and may be banned from claiming the credit for two to 10 years.