Americans will miss out on millions of refund dollars this tax season, as they do every year, simply because they fail to claim the Earned Income Tax Credit. This credit has been around since 1975, when it was installed to help families of low and moderate wage earners offset the burden of Social Security taxes. Over the years, it has been routinely lost in the paperwork of many taxpayers.
Awareness of this valuable credit is on the rise, thanks to an IRS campaign that included Earned Income Tax Credit Awareness Day on Jan. 27. Still, it is estimated that one in five taxpayers eligible for the credit will fail to claim it. In tax year 2010, nearly 27 million workers received $60 billion through this credit. The average filer who claimed the credit got $2,200.
The credit is often overlooked because a third of the eligible population turns over every year, owing to changes in their income or marital or parental status. Even if you owe no tax, you must file a return to claim the EITC credit, which is refundable—meaning that if the credit is larger than the amount of taxes due you will get the difference in a refund.
To claim the credit, you must have less than $49,078 from wages, self-employment or farm income. You can get up to $464 without children at home and up to $5,751 with three or more children at home. Find out if you qualify here. Those eligible for the EITC have these options to file a tax return to claim the credit:
• Free filing at IRS.gov Free tax software walks you through a question and answer format to help prepare your return. The program also allows you to file electronically for free.
• Free tax preparation sites Workers can seek free tax preparation at more than 12,000 Volunteer Income Tax Assistance and Tax Counseling for the Elderly sites. To locate one near you call 800-906-9887.
• IRS Taxpayer Assistance Centers Workers can seek free assistance in IRS locations across the country. Locations are listed at IRS.gov.