Cranmere Accounting & Tax Services
If you satisfy certain conditions you may qualify for a beneficial tax credit called Earned Income Credit (EIC). In this article we give an outline of the credit so that you have a better understanding of why your tax preparer is asking you certain questions. It will also draw your attention to certain areas to make sure that during the preparation of your income tax return you don’t miss out on any credit you are entitled to.
EIC can be worth up to $5,751 (2011 Tax Year) as a refundable tax credit. That means you get hard cash back even if you have no taxable income. However, the rules to claim EIC are quite complex so your tax preparer will need to ask you quite a few questions to make sure that you qualify and get the best credit for your circumstances.
In summary these are the key qualifications to claim Earned Income Credit:-
- You must have earned income, i.e. wages or self-employment
- Your earned income and adjusted gross income must be less than:-
- $43,998 ($49,078 married filing jointly) – 3 or more qualifying children
- $40,964 ($46,044 married filing jointly) – 2 qualifying children
- $36,052 ($41,132 married filing jointly) – 1 qualifying child
- $13,660 ($18,740 married filing jointly) – no qualifying children
- Investment income must be less than $3,150
- If you have no qualifying children you must be aged over 25 and under 65
- You cannot use the married filing separate filing status
- You must have a valid Social Security Number
There are some other conditions to be satisfied as well which your tax preparer will cover as they ask you questions about you and your family. Be open when answering the questions and give full information. It is easy to miss things like qualifying children if your tax preparer does not have all the information and you may miss out on a tax credit.
Also bear in mind that there are heavy penalties for filing an incorrect EIC claim. Not only will the credit need to be paid back plus penalties and interest you may also be banned from claiming EIC for up to 10 years.
One final point to remember is that if you failed to claim EIC in the last three years it is not too late to claim. In general you have until three years after the date you filed a return to submit an amended return to claim the credit. For example for most taxpayers an amended return for 2008 needs to be filed by April 15, 2012.
If you think you qualify for Earned Income Credit call us on (480) 363-4808 to book an appointment to prepare your tax return. If you live in the Phoenix area we will come to you to prepare your income tax return. If you live outside of Phoenix or Arizona we can prepare the return using information you upload to our secure client portal or mail to us. We look forward to helping you prepare your income tax return and claim your EIC.
Disclaimer – This article does not constitute personal tax advice to the reader and is only offering general information. You should seek professional advice for your own situation as the most appropriate tax planning depends on your personal and unique circumstances.
Posted By Mark Smith
Mark Smith, EA is an Enrolled Agent and accountant with over 30 years tax and accounting experience. He is the owner of Cranmere Accounting and Tax Services LLC. He can be contacted on (480) 363-4808 or by email at info@cranmereaccountingandtax.com if you need assistance with any of the above.
