Jackson Hewitt® is here to help you understand complex tax laws so you can be better informed and take full advantage of tax law provisions.
These topics explore some of the more important aspects of complicated tax laws, in a manner that is understandable and concise.
The Earned Income Credit (EIC) is a refundable federal tax credit for eligible individuals and families who have earned income. You have earned income if you work for someone who pays you or if you work in a business you own. Taxable earned income includes wages, salaries, tips, union strike
benefits, long-term disability benefits received prior to minimum retirement age and net earnings from self-employment. If you can take the EIC, it reduces the tax owed. The credit can be refunded even if you do not owe any tax.
The amount of this credit varies depending on the number of qualifying children living with you. You could be entitled to a refundable credit of up to $6,242 if you have three or more qualifying children, $5,548 if you have two qualifying children, $3,359 if you have one qualifying child, or $503 if you
have no qualifying children or no children at all.
Contact your local Jackson Hewitt office for more information.
To qualify for the EIC, you must meet the following requirements:
Even if you are not required to file a return because you did not earn enough during the year, you may still qualify for the EIC. However, to get the credit, you must file a return and meet all the rules.
For example, James and Terri are married and have two children, ages 4 and 7. All of them are U.S. citizens and lived in the same home in the U.S. all year. No one else lived with them and neither James nor Terri can be claimed as a dependent on
another person's return. They plan to file a joint return. James is self-employed and had a net profit from his business of $38,000. Terri is unemployed and received unemployment benefits of $12,400. James received $17 in interest from a savings account. James and Terri have no other income or
expenses. They will be able to claim the EIC on their joint return because they meet all the conditions listed above: one of them has earned income, they are not filing a separate return, their earned income and adjusted gross income are under $49,974 and their investment income is under $3,400.
To claim the EIC, you must have a valid Social Security number (SSN) that allows you to work. Additionally, your spouse (if Married Filing Jointly) and any qualifying child you list on Schedule EIC must also have valid SSNs. An SSN is a number issued by the Social Security
Administration to a U.S. citizen or to a person who has permission to work in the United States. This permission to work in the United States was previously granted by the Immigration and Naturalization Service (INS), but is now granted by the U.S. Citizenship and Immigration Services (USCIS), a bureau of
Homeland Security. If your spouse's, any qualifying child's, or your own SSN is missing from your tax return or is incorrect, the IRS may disallow your EIC.
If the Social Security card says "Not valid for employment" and the card was issued so that you could get a federally funded benefit (such as Medicaid), you cannot claim the EIC. If you have a card with the legend "Not valid for employment" and your immigration status has changed so that you are
now a U.S. citizen or permanent resident, request a new card (one without the legend "Not valid for employment") from the Social Security Administration. If your Social Security card reads "Valid for work only with INS authorization,"then you do have a valid SSN.
You cannot get the credit if you, your spouse, or your qualifying child has:
If you (or your spouse if Married Filing Jointly) do not have a SSN, you can apply for one by filing Form SS-5 with the Social Security Administration. If you do not have a valid SSN by the filing deadline for your tax return, you can either:
Generally, your qualifying child is a child who meets all of the following tests:
For example, Dianna is 27 years old and lives with her 3-year-old son, Alex, and her mother, Bridgette. Dianna earned $14,000 in wages. Bridgette also works and earned $25,000. Alex meets all of the tests to be a qualifying child for Dianna and Bridgette. Because only one of them can
use Alex as a qualifying child and claim the EIC, they must look to the Tie-Breaker Rule to determine which one of them will use Alex as a qualifying child. Based on the Tie-Breaker Rule, Dianna will be the one allowed to use Alex as a qualifying child and to claim the EIC because she is Alex's
What if Dianna had been living with Alex's father, Martin, to whom Dianna is not married, and Martin's adjusted gross income was higher than Dianna's? If Dianna and Martin both filed tax returns using Alex as a qualifying child, Martin would be the one allowed to use Alex as a qualifying
child and claim the EIC, because Alex lived with both parents the same amount of time and Martin's adjusted gross income is higher.
You may still be eligible for the EIC if you do not have a qualifying child if you meet all of the applicable rules, and you (or your spouse if filing a joint return) were at least age 25 but under age 65 at the end of the year.
You will not be eligible for the EIC if the IRS has determined that you have previously claimed the credit fraudulently or recklessly. A fraudulent claim results in a 10-year loss of eligibility. A reckless claim results in a two-year loss of eligibility.
If you received a notice of deficiency denying your EIC for a previous year and you want to claim the EIC for current tax-year, you usually need to complete Form 8862, Information to Claim Earned Income Credit After Disallowance, and attach it to your return.
You do not need to complete Form 8862 if both of the following apply to you:
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