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| Putting the pieces together: The Earned Income Tax Credit |
March 15, 2007 |
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Are you eligible
for the
Earned Income Tax Credit?
"Congress authorized this tax credit specifically to help lower-income workers. It’s a tax policy meant to benefit those workers who need it most, so I encourage everyone to make sure they see if they qualify. This can be a significant amount of money for a working family.”
--Congresswoman Heather Wilson
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What is the EITC?For many taxpayers, tax season can be a stressful time.
But for workers and families who are eligible for the Earned Income Tax Credit (EITC), this time of year can mean extra money in your pocket through a tax provision put in place by Congress.
The EITC rewards people who work. If a person has a job, but does not make a lot of money, the EITC kicks in to provide a higher tax refund and puts more money in their bank account.
Our economy offers tremendous opportunities for people who work hard. And low-paying jobs are often the first step on the ladder of economic success – a way to gain the experience and skills to land a better job and earn a higher income in the future.
Money on the Table?The Internal Revenue Service (IRS) estimates that as many as one of every four workers eligible for this important credit are not signing up for it, possibly because they are unaware of it or do not have enough information about it.
Rep. Heather Wilson wants all New Mexicans who qualify for the credit to reap the benefits.
“A lot of New Mexico taxpayers should be benefiting from this tax credit,” Wilson says. "My concern is that many taxpayers might not realize this credit is available to them.”
If you qualify for the credit but don`t file for it, you`re leaving money on the table. Don`t make that mistake.
A young girl smiles as Rep. Wilson waits to speak in support of the commodity food program for low-income New Mexicans. Rep. Wilson wants qualifying New Mexicans to take advantage of the earned income tax credit.
How do I know if I qualify?You may be able to take the credit if:You have more than one qualifying child and your earned income was less than $36,348 ($38,348 if married filing jointly),
You have one qualifying child and your earned income was less than $32,001 ($34,001 if married filing jointly), or
You do not have a qualifying child and your earned income was less than $12,120 ($14,120 if married filing jointly).
This interactive IRS webpage walks you through a series of questions to determine if you are eligible for the Earned Income Tax Credit. Your eligibility depends on such factors as your filing status, income level, and the number of qualifying children you have, if any. This tool will not only determine your eligibility, but can also determine your filing status, and the number of your qualifying children, and it can estimate your credit amount.
This IRS flyer, EITC Eligibility Checklist for Tax Year 2006 (PDF), walks you through some basic questions to give you an idea of whether or not you might be eligible for the EITC.
Will receiving the EITC affect my Welfare Benefits?The EITC has no effect on certain welfare benefits. In most cases, EITC payments will not be used to determine eligbility for Medicaid, Supplemental Security Income (SSI), food stamps, low-income housing or most Temporary Assistance for Needy Families (TANF) payments.
Help for taxpayersTrained volunteers are available throughout New Mexico to help low-income New Mexicans and seniors file their taxes.
Many workers who are eligible for the EITC don’t feel comfortable filling out tax forms themselves. But a commercial tax preparer may charge $55 to $130 to prepare even a simple tax return. It can cost another $100, or more, to get a “refund anticipation loan” that provides the taxpayer a “refund” in just a day or two.
Since people who are eligible for the EITC earn lower incomes, it often doesn’t make sense for them to pay for tax preparation when there is a cost-free choice — VITA.
VITA stands for Volunteer Income Tax Assistance. It is a free, IRS-sponsored program to help low-income workers file their tax forms.
The Volunteer Income Tax Assistance Program (VITA) is available to low to moderate income (generally, $39,000 and below) people who need help preparing their tax returns.
VITA volunteers are trained, according to IRS guidelines, to fill out tax forms and answer questions. Volunteers usually prepare tax forms on a first-come, first-serve basis. Check here for list of VITA sites in New Mexico`s First Congressional District.
Be preparedIf you decide to have a VITA volunteer help you with your return, there are certain documents you should bring to make the process easier and quicker.
Proof of identification
Social Security Cards for you, your spouse and dependents and/or a Social Security Number verification letter issued by the Social Security Administration
Birth dates for you, your spouse and dependents on the tax return
Current year’s tax package if you received one
Wage and earning statement(s) Form W-2, W-2G, 1099-R, from all employers
Interest and dividend statements from banks (Forms 1099)
A copy of last year’s Federal and State returns if available
Bank Routing Numbers and Account Numbers for Direct Deposit
Total paid for day care provider and the day care provider`s tax identifying number (the provider`s Social Security Number or the provider`s business Employer Identification Number)
To file taxes electronically on a married filing joint tax return, both spouses must be present to sign the required forms.
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