Complicated earned income credit eligibility means 1 in 5 don’t claim the valuable tax credit

October 15, 2019 : Annelise Wiens

One of the most valuable tax benefits is the earned income tax credit (EITC). Last tax season, 25 million filers received about $61 billion in EITC. With a maximum credit of more than $6,400, the average amount of EITC was more than $2,500.

Despite its value, it’s also one of the most overlooked credits: 20% of eligible taxpayers do not claim this credit. Millions of workers don’t claim the earned income tax credit because they do not understand the eligibility requirements or they are not required, and decline, to file.

EITC eligibility often fluctuates year to year

Taxpayers who will earn $55,952 or less in 2019 should check if they are eligible for the earned income credit. Depending on their income and the number of children they have, they may be eligible for an EITC of up to $6,557 for 2019. Even working taxpayers without children and earnings of $21,370 or less may qualify for an EITC of up to $529.

“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,” said Alison Flores, principal tax research analyst at The Tax Institute at H&R Block. “Just because they did not qualify last year does not mean they will not this year.”

In fact, about one-third of EITC recipients changes each 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.

Earned income tax credit eligibility means filing even if it isn’t required

Another reason so many people overlook claiming EIC 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 earns $20,000 in 2019, they are probably not required to file a tax return because their income is under the filing threshold of $24,400 for married taxpayers filing jointly. Even if they had no income taxes withheld from their income, they could be eligible for an EITC of about $3,500 to about $6,500 if they have one or more children. The only way for them to claim the earned income tax credit is to file a tax return.

EITC filers facing refund delays should file as they normally would

As many as 25 million taxpayers could have their refunds delayed until mid-February. The IRS is required to hold refunds for returns claiming the earned income tax credit (EITC) and additional child tax credit (ACTC) until mid-February.

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 2020 until February 15 and then begin issuing them.

Missing out on claiming the earned income tax credit can prove costly to the one in five eligible taxpayers who overlook the opportunity. When in doubt, getting help from a qualified tax professional can potentially put thousands of dollars back into the pockets of working families.

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Annelise Wiens

Annelise Wiens

Editor and Producer

As the newsroom editor, Annelise Wiens is interested in more than just tax and industry news, but the stories of H&R Block's 80,000 associates, their communities and H&R Block's world headquarters in Kansas City, Missouri. Wiens joined H&R Block in 2014 from a public relations agency, where she worked with clients in the financial services industry. Before that, she worked as a communicator for a senior member of the United States House of Representatives. She graduated from Biola University in La Mirada, CA with a bachelor's degree in history.

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