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The Tax Break That Millions Miss Out On

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Tax breaksThere's a popular tax break out there that paid more than 26 million workers a total of nearly $59 billion last year. Yet as many as 1 in 4 of those who qualify for this tax credit failed to claim it, missing out on hundreds, or even thousands, of dollars.

That break is the earned income tax credit. Designed to help low- and middle-income wage earners make ends meet, the credit helps reverse the effect of payroll taxes. Despite the best efforts of community organizations and various government agencies, however, the credit doesn't reach some of the families who need it most.

What You Need to Know

The earned income tax credit covers families of various sizes, with different income limits and credit maximums. Joint filers with three or more children are eligible if they earn less than $49,000, with a maximum credit of about $5,750. Smaller families have slightly lower income limits and credit amounts, and even if you don't have any children, you may be entitled to up to $464 if you earn $13,660 or less and are single or $18,740 for married couples.

The key to the earned income tax credit is that you have to have income from a job or business. Interest and dividends, Social Security payments, and unemployment benefits don't count for claiming the credit.

But what many don't realize is that you can get cash back from the credit even if you don't owe tax. That's unusual for a credit, but it's what makes the earned income tax credit especially valuable for those who are struggling to make ends meet.

The problem with the credit is that it's fairly complicated, with various rules that can make it hard to figure out if you're actually eligible. But with that in mind, the IRS set up a quick eligibility quiz. Of course, many low-income taxpayers don't have access to computers, so getting everyone eligible to claim the credit will continue to be difficult.

Get What You Deserve

So be sure to check and see if you're eligible for the earned income tax credit. In tough times, some extra money can make all the difference.

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Mike

Step back for a moment and read this article like you were doing your taxes for the first time. A million monkeys in a million years couldn't design a system more aas backwards than this one.

April 05 2012 at 10:30 AM Report abuse rate up rate down Reply
David

To get this deduction do you have to itemized or is there a line on the 1040 form to put it in?

March 28 2012 at 9:04 AM Report abuse rate up rate down Reply
ruthselfkisfl

Am I eligible for earned income credit if I only earned my social securiatay retirement of 10,880 and a small salary of roughly 5,000. I also still had a child at home for 6 months of the year.

March 24 2012 at 10:43 PM Report abuse rate up rate down Reply
swesptavolunteer

This article is somewhat misleading. Recently the Justice Department on evidence from the IRS arrested 90 people for identity theft and EITC fraudt. EITC is the most common area of tax fraud, with people claiming dependants that are not really dependents. There is no statistic that I have heard of (and I get about 10 emails a day for IRS subscriptions) that 1/4 eligible taxpayers don't claim it. The link to the webpage for the IRS EITC "wizard" is http://www.irs.gov/individuals/article/0,,id=130102,00.html

March 24 2012 at 10:04 PM Report abuse rate up rate down Reply
MikeS

Ah yes the Negative Tax. This as well as all other forms of Welfare need to be driven from our tax code.

If somebody needs a helping hand then write them a check and let them know it is from their neighbors who are generous enough to help somebody out.

March 24 2012 at 9:39 PM Report abuse rate up rate down Reply
tcdesalvo

$LiM - if you got more money back than you paid in, you did not pay taxes! The very title of the program is an oximoron. If something is given to you, you did not earn it.

March 24 2012 at 9:36 PM Report abuse rate up rate down Reply
hotsteper7

i own 12 sect 8 houses i talk and listen to my low income tenants. the scams they have are unbelievable.
first off if one worked and one dident they would offer to sell the rights to the person who worked to claim them on their taxes. when one goes to jail and they have children a family member will care for the children and become foster parents earning about 500 per month per child, when the person gets out of jail the person whos getting the 500 per child tells the state the mother ha sabounded the children and is out on the streets doing drugs. they then continue to get the money from state split it with the parent who really is living at home home the children alla big scam
theres so much more going on than most working "normal amercians dont know about

March 24 2012 at 9:35 PM Report abuse rate up rate down Reply
clyogi

The author's conclusion is wrong. For tax year 2010, Turbo Tax told me I was not entitled to this credit so I did not declare. The IRS increased my refund by the amount of the credit and sent a letter explaining that I had failed to take the earned income credit. So, Mr. author, even if you fail to include the credit on your return, the IRS will probably correct the error and still give you the credit.

March 24 2012 at 9:30 PM Report abuse rate up rate down Reply
hotsteper7

Type your comment here
u demo dopes dont get it. my daughter with 3 kids is on welfare she worked part time last year made $3900
last year paid 347 in taxes got a refund from irs for $4726.00 its 100% charity

March 24 2012 at 8:42 PM Report abuse rate up rate down Reply
sadiemae1214

Just so I don't have to repeat myself......The earned income credit was established by the REPUBLICANS in the 70's. GOOGLE IT!

March 24 2012 at 8:14 PM Report abuse rate up rate down Reply
1 reply to sadiemae1214's comment
MikeS

yes that is why we are in process of driving out the RINOs.

March 24 2012 at 9:41 PM Report abuse rate up rate down Reply