Feature Articles: Taxes
Earned Income Credit
Brenda Procter, M.S., Extension Associate Professor, Personal Financial Planning, University of Missouri Extension
The Earned Income Credit (EIC) is a federal income tax credit for working families with low to moderate incomes. The EIC, sometimes referred to as the Earned Income Tax Credit, is available to married and single parents or caregivers. Individuals and families without children may also receive the EIC if their incomes are low enough.
Q. What is the Earned Income Credit (EIC)?
A. The EIC is a federal tax credit for working families, with or without children, who meet certain income guidelines. Eligible families either pay less federal income tax or get a larger tax refund.
Q. How much money can I get if I qualify for the EIC?
A. The following numbers are for tax year 2012:
- Workers who earned less than $36,920 (or $42,130 for married workers) and were raising one child in their homes may be eligible for an EIC of up to $3,169.
- Workers who earned less than $41,952 (or $47,162 for married workers), and were raising two children in their homes, may be eligible for a credit of up to $5,236.
- Workers who earned less than $45,060 (or $50,270 for married workers), and were raising three or more children in their homes, may be eligible for a credit of up to $5,891.
- Workers at least age 25 and under 65, who earned less than $13,980 (or $19,190 for married workers) and were not raising children in their homes may be eligible for a credit of up to $475.
Q. How would I actually get my benefit?
A. You will only get the benefit if you file a tax return and a schedule EIC. The amount of your EIC benefit is determined by your income and family size. See the EIC chart in your tax return instructions.
You can get your benefit in one of two ways:
- As a higher income tax refund from the IRS at the end of the tax year, or
- As a smaller amount of income tax you must pay at the end of the year
Q. What do I count as income to figure my benefit?
A. Any of the following count as earned income under the EIC guidelines:
- Wages and tips
- Certain military pay and allowances
- Certain strike benefits
- Disability long-term benefits, if taxable
- 401(K)-type contributions by your employer
- Cafeteria-plan contributions by your employer
Q. Who can get the EIC?
A. Two separate groups of people can get the EIC.
1) You are in the first group of eligible taxpayers if:
- There is a qualifying child living in your home,
- You or your spouse worked part-time or full-time in 2012,
- The family's adjusted gross income was less than:
- $36,920 (or $42,130 for married workers) for households with one child; or
- $41,952 (or $47,162 for married workers) for households with two children; or
- $45,060 (or $50,270 for married workers) for households with three or more children; and
- You do not have certain disqualifying investment income greater than $3,200.
Qualifying children include: sons, daughters, stepchildren, grandchildren and adopted children, as long as they lived with the worker in the United States for more than half the year. Brothers, sisters, stepbrothers or stepsisters – as well as descendants of such relatives – can be claimed as foster children if they lived with the taxpayer more than half the year and were cared for as members of the family. Other children may qualify as foster children, but only if they are placed with the worker by an authorized placement agency.
A qualifying child must be:
- Less than 19 years old,
- Or a full time student under 24,
- Or totally and permanently disabled (no matter the age).
2) If a child is not in your household, you might still be eligible for the EIC. To qualify for this group of eligible taxpayers:
- You must be more than 24 years old and less than 65 years old,
- You must have lived in the United States for more than half the year,
- You cannot be the dependent of another taxpayer,
- Your family must have had an adjusted gross income less than $13,980 (or $19,190 for married workers),
- You or your spouse must have worked part-time or full-time in 2012, and
- You do not have certain disqualifying investment income greater than $3,200.
Q. Does it matter whether my spouse and I file joint or separate income tax returns?
A. Yes, it does matter! If you are married and you and your spouse file separate returns, you will not get the EIC. Both of you must file a joint return to get it.
Q. I am single. Can I still get the EIC?
A. Yes, if you meet the guidelines outlined above.
Q. I already get food stamps and other benefits. Can I still get the EIC?
A. Yes, your other benefits will in no way affect your eligibility for the EIC.
Q. Will the EIC affect other benefits?
A. Generally, no. Under federal rules, the EIC is not counted as income for Medicaid, Food Stamps, SSI or federally assisted housing programs; however, the EIC must be spent by the end of the month after the month in which it is received or it can count as a resource in determining eligibility for Medicaid, SSI or federally assisted housing programs. The EIC can count as a resource in determining eligibility for Food Stamps if it is not spent within 12 months of receiving it. Often, if the recipient has few or no other resources, the amount of the EIC is not enough to cause that recipient to exceed the resource limit for the benefits programs mentioned.
The welfare legislation enacted in August 1996 replaced the AFDC program with a new block grant program called Temporary Assistance for Needy Families (TANF). Under the block grant, each state can set its own rules for how the EIC will be treated in determining eligibility for cash assistance, but so far no state has counted EIC as income. However, states could consider changing such rules for the future.
Q. Can I get the Child Tax Credit and the EIC?
A. Yes. Claiming the Child Tax Credit does not reduce benefits from the EIC.
Q. Who do I contact about getting the EIC?
A. Because it is a tax credit, you must work through the Internal Revenue Service to get it.
Q. What forms do I need to complete?
A. If you raised children in 2012, you must file either Form 1040 or 1040A and must fill out and attach Schedule EIC. Workers with children cannot get the EIC if they file Form 1040EZ or fail to attach Schedule EIC. Married Workers must file a joint return to get the EIC.
If you are not raising children, you can file any tax form, including the 1040EZ. Write "EIC" or the dollar amount of your credit on the Earned Income Credit line on the tax form. You do not file Schedule EIC. Be sure to provide a correct name and Social Security number for every person listed on the tax return and Schedule EIC to prevent delays in your refund.
Q. Can I still receive the EIC if I don't owe any income tax and do not have to file a tax return?
A. Yes, you can, but only if you actually file a 1040 or 1040A tax return and a Schedule EIC. The government will send you a check in the amount of the EIC benefit. Filers with no children can use Form 1040EZ.
Q. Is there any way to get benefits for past years when I did not know about the EIC?
A. You can apply for EIC benefits for each or all of the last three years, if you qualified, by filing an amended tax return (1040X) for each year in question. Call 1-800-829-3676 (1-800-TAX-FORM) to order forms or visit the IRS website.
Q. Is there a way to receive the EIC each month rather than in one yearly payment?
A. No, the Education Jobs and Medicaid Assistance Act of 2010 eliminated advance EIC payments for tax years beginning after December 31, 2010.
Q. How do I apply for the EIC?
A. You must fill out two IRS forms:
- Form 1040A or 1040 (filers without children may be able to use the 1040EZ)
- Schedule EIC
You can get the forms at the public library or post office. Or download forms from the IRS website at IRS.gov/formspubs/
Q. Can I get free help in filling out these forms?
A. Yes, through a program called Volunteer Income Tax Assistance (VITA). VITA clinics are open from January through April.
To find out where the closest one is, call the IRS at 1-800-829-1040. Or, if you live in Missouri you can find a local free income tax preparation site at http://extension.missouri.edu/hes/taxed/vitasites.htm. Many Missouri communities do not have VITA sites available. If no VITA site is available in your community, you may also get help at an IRS office or an Elderly Tax Assistance Site.
Q. Are there any other sources of free help available?
A. Workers with children can file either Form 1040 or 1040A and fill out and attach Schedule EIC. You can write in "EIC" on the Earned Income Credit line of your tax form. The IRS will then calculate the amount of the EIC, as long as the completed Schedule EIC is attached. Families can also get free help by calling 1-800-829-1040 during regular business hours. People who are deaf or hard of hearing and have TTY/TT/TDD equipment can call 1-800-829-4059.
Q. What will happen if I try to fill out a tax return after not doing one in a long time?
A. Ask the IRS. You do not have to give your name.
Q. Where can I find more information?
A. For more EIC information, visit the IRS website at http://www.irs.gov/pub/irs-pdf/n797.pdf
Last update: Monday, March 18, 2013