Extra Money for Low- And Moderate-Income People Who Work

Do you struggle to get by from paycheck to paycheck? Then you should know about the Earned Income Tax Credit (EITC) sometimes called Earned Income Credit, a special tax benefit for people who work full-time or part-time. Millions of low wage taxpayers qualify. Many legal immigrants can qualify for the EITC, as long as they meet the eligibility requirements.

The EITC is a special tax benefit for working people who earn low or moderate incomes. If you qualify for EITC and file a federal tax return, you can get back some or all of the federal tax withheld from your pay during the past year. Even if you didn’t earn enough to pay an income tax, you may still qualify for EITC. Last year, an estimated $822,435 in Earned Income Tax Credit went unclaimed by Carroll County residents.

If you worked full-time or part-time at some point in 2004 and your income falls within the IRS guidelines, you may qualify for the EITC. According to the IRS, your income must be less than: $34,458 (married filing jointly $35,458) with two or more qualifying children; $30,338 (married filing jointly $31,338) with one qualifying child; or, $11,490 (married filing jointly $12,490) with no children.

The IRS considers a qualifying child as any child who lived in your household for more than half of 2004 or your son, daughter, adopted child, grandchild, great-grandchild, stepchild, or eligible foster child who alsomeets one of the following criteria: was younger than age 19 at the end of the tax year; was a full-time student under age 24; or, was permanently and totally disabled at any age during the year. Only one person can claim qualifying children for EITC.

In addition to filing the appropriate IRS tax forms, you must provide a correct name and Social Security number for every person listed on the tax return and Schedule EITC. If this information is incorrect or missing, the IRS will delay the refund. Workers also don’t have to calculate their own EITC; if they choose, the IRS will do it for them.

Workers raising children can get part of their EITC in their paychecks throughout the year. The rest will come back as a check from the IRS after the worker files a tax return. This is called the Advance EITC payment option.

To learn more about Earned Income Tax Credit, visit the IRS web site (follow the links for individuals) or call 1-800-829-3676. Many local libraries or post offices also carry IRS publications and tax return forms.

Many families that apply for EITC pay someone to complete their tax forms. This can cost $55 to $200 or more. Getting a “quick tax refund” may cost you more than you will get back. Low-income workers can get free help with tax preparation through IRS trained volunteers at AARP or VITA sites throughout New Hampshire.

To find the Tax-Aide Program location nearest you, call the New Hampshire Help Line at 1-800-852-3388 for a referral to a free tax preparation site.

UNH Cooperative Extension is an equal opportunity educator and employer, “Helping You Put Knowledge and Research to Work.” Visit the UNH Cooperative Extension web site at http://ceinfo.unh.edu for more information on money management.

Ann Hamilton is an Extension educator in family and consumer resources with the University of New Hampshire Cooperative Extension in Carroll County.