Eligible taxpayers miss out on Earned Income Tax Credit
One of the benefits that can help eligible taxpayers get their taxes won is the Earned Income Tax Credit (EITC). Last tax season, almost 26 million filers received about $65.6 billion in EITC. With a maximum credit of more than $6,000, the average amount of EITC was more than $2,400.
Despite its value, it’s also one of the most overlooked credits: 20 percent of eligible taxpayers do not claim this credit. Millions of workers miss this credit because they do not understand the eligibility requirements or they are not required, and decline, to file.
Check eligibility for the EITC every year
Taxpayers who earned $53,505 or less in 2016 should check if they qualify for the EITC. Depending on their income and the number of children they have, they may be eligible for an EITC of up to $6,269 for 2016. Even working taxpayers without children and earnings of $20,430 or less may qualify for an EITC of up to $506.
Because eligibility for the EITC can fluctuate based on financial, marital and parental changes, a taxpayer can be ineligible one year and eligible the next. It is important for workers to check each year if they qualify for the EITC. Just because they did not qualify last year does not mean they will not this year.
Workers may use an IRS online tool to check their eligibility and estimate their credit. However, the online tool is an estimator only and is not used to claim the credit.
Choose to file even if it isn’t required
Another reason so many people overlook the EITC is because they may not earn enough money to have to file a return. Without a tax obligation, they may think they have no reason to choose to file a return. But because the EITC is a refundable credit, an eligible person can still get the credit even if they do not owe and have not paid income taxes.
For example, if a married couple earned $20,000 in 2016, they are probably not required to file a tax return because their income is under the filing threshold of $20,700 for married taxpayers filing jointly. Even if they had no taxes withheld from their income, they could be eligible for an EITC of about $3,000 to about $6,000 if they have one or more children. The only way for them to claim this credit is to file a tax return.
EITC filers facing refund delays should file as they normally would
As many as 15 million taxpayers could have their refunds delayed until as late as February 27. The Protecting Americans from Tax Hikes (PATH) Act now requires the IRS to hold refunds for returns claiming the earned income tax credit (EITC) and additional child tax credit (ACTC) until February 15. Approximately 30 million taxpayers claim the EITC or ACTC, with half filing early.
While the IRS will release those refunds on February 15, many taxpayers may not see the funds deposit into their banking accounts until as late as February 27. This additional delay could be for many reasons and it is best for taxpayers to check the IRS’s Where’s My Refund website for any funding updates.
Taxpayers should file as they normally would, even if they expect their refund will be delayed. The IRS still expects to issue most refunds in less than 21 days, although the IRS will hold refunds for EITC and ACTC-related tax returns filed early in 2017 until February 15 and then begin issuing them.”
Missing out on the EITC can prove costly to the one in five eligible taxpayers who do not claim it. When in doubt, getting help from a qualified tax professional can potentially put thousands of dollars back into the pockets of working families.
The earned income tax credit is one of the nation’s largest anti-poverty programs and an important piece of annual income for millions of Americans.
There are several commonly overlooked tax benefits you can claim. Make sure you read up on them so you don't end up leaving money on table with your tax refund.
Education tax benefits for students and their parents can save both money