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Are you missing a tax break?
IRS, co-ops team up to remind members of Earned Income Tax Credit
By Patricia M. Gilliam,
Senior IRS Tax Specialist
York Electric Cooperative and the federal Internal Revenue Service (IRS) are collaborating to educate co-op members about the Earned Income Tax Credit (EITC).
 Last year, more than 20 million individuals received the Earned Income Tax Credit (EITC), lifting five million out of poverty and returning $36 billion in income to low-wage workers. The benefits of the tax credit also extend to the communities in which recipients live. A study by the Brookings Institution reports that EITC returns for the 2005 tax year raised incomes by $30,568,599 in York County, $12,504,363 in Lancaster County, $10,936,365 in Cherokee County, and $8,400,693 in Chester County.
Despite the significant benefits it provides, two factors hamper the effectiveness of the Earned Income Tax Credit. First, the IRS estimates that four million eligible individuals annually fail to file for the tax credit. Anecdotal evidence suggests that misinformation about tax credit eligibility, and the length and complexity of tax forms, contribute to taxpayers' failure to file, forfeiting an estimated $2.9 billion in EITC income. Second, millions of taxpayers claim the credit, only to lose a significant portion in tax preparation fees and costly refund anticipation loans.
EITC refunds can be in the hands of taxpayers in seven to 10 days for those who electronically file their returns.
To claim the EITC, taxpayers must meet the following rules:
- Must have earned income
- Must have a valid Social Security number
- Investment income is limited to $2,900
- Filing status can't be "married filing separately"
- Generally must be a U.S. citizen or resident alien all year
- Cannot be a qualifying child of another person
- Cannot file Form 2555 or 2555-EZ (related to foreign-earned income) You need to have worked and have earned income less than:
- $12,590 ($14,590 if married filing jointly) if there is no qualifying child
- $33,241 ($35,241 if married filing jointly) if there is one qualifying child
- $37,783 ($39,783 if married filing jointly) if there is more than one qualifying child Qualifying child criteria:
- The child must meet the relationship, age and residency tests.
For more information on the Earned Income Tax Credit and electronic filing, visit irs.gov/eitc or call 1-800-TAX-1040. IRS Publication 962 also includes information about the credit.
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