 Internal Revenue Service IRS tax news! EITC Awareness Day important changes mean more people qualify for credit that helps millions of Americans. But first, an attempt at a joke, I apologize in advance. The IRS's favorite slogan. A fool in his money, are soon parted. Hey, wait a second! I think they're referring to us! Like, as the fool! Who they're parting from our money? Honestly, it seems like things these days are getting more and more absurd. Absolutely ridiculous. There's an IRS YouTube video here called Earned Income Tax Credit. The EITC can put more money in your pocket. IR 2022-20 January 28, 2022, Washington. More people without children now qualify for the Earned Income Tax Credit. The EITC, the federal government's largest refundable tax credits for low to moderate income families. So quick recap on the EITC, the Earned Income Tax Credit. It's one of the largest credits as they say here for low to moderate income families. It's also one of the most complex credits to calculate as well. So you want to most likely be using software to see if you qualify for the credit and to be able to properly calculate it. You want to take a look at the free file software that might be available to you if your income is below a certain level which you can look for on the IRS website, irs.gov. The fact that it is a credit, it means that it's different than a deduction. If you had $1 of a credit versus $1 of a deduction, the credit would generally be worth more. It's also the credit then possibly can lower the amount of liability or increase the amount of the refund that you might be receiving. And the term refund is a little bit deceiving because it's possible then with the refundable portion, refundable portion meaning that you can actually get money even if it goes beyond the tax liability. So that's what the refundable kind of component of the Earned Income Tax Credit means. Now it's a credit that is for low to moderate income families but it also has that earned income kind of component to it. So the idea from an economist kind of like this one because generally when you have like benefit type of programs that are trying to help out low to moderate income families, the problem with them is they create a disincentive for people to work because when people work they lose the benefits and so therefore in an attempt to make things better, a lot of times these laws actually make things worse, the Earned Income Tax Credit is designed to basically have some, actually go up as income goes up, as earned income goes up in an attempt to incentivize people to have earned income. So that's a good thing but it also makes things a bit more complicated in terms of the calculation of the Earned Income Tax Credit because it actually goes up as your income goes up and then it's going to peak at some level. You can imagine it then going down. That's what the curve will look like as your income goes up and then it'll go down after your income reaches a certain level. They also have it tied to children. So you're going to have dependents that will be involved as well which the whole tables then are going to be different with regards to the dependent levels. There's been a lot of debate about whether or not they should try to break the credit up to have the Earned Income Portion separate from the credit related to children or dependents but that's where it is now. So that's the Earned Income Tax Credit, fairly complicated credit to be thinking about or to look into. It also has the fact that your Earned Income in this time of the pandemic period, they've been trying to say well if your Earned Income was higher or more beneficial in the prior year, you might be able to use the prior year's Earned Income in order to get a bigger or more maximized credit as well which again further complicates the calculation of the Earned Income Tax Credit. So software, useful, free software online. Check out the free file and look into it in more detail there. In addition, families can use the pre-pandemic income levels to qualify if it results in a larger refund. So again, that's usually a funny kind of thing to happen because now they're saying okay it's an Earned Income Tax Credit, we're trying to intensify people to work and therefore we're going to give more of a credit if they work but because of the pandemic people possibly couldn't work more often and we want to kind of remove that from the law but not completely so we're going to allow you to go back to the prior year to take the Earned Income basically from the prior year and see if it is more beneficial. So the internal revenue service and partners across the nation highlight those changes today as they mark the 16th annual EITC Earned Income Tax Credit Awareness Day enacted in 1975. The EITC is regulated as one of the government's largest anti-poverty programs, helping millions of American families every year. The IRS and partners nationwide urged people to check to see if they qualify for this important credit and also urged people who don't normally file a tax return to review whether they qualify for EITC and other valuable credits like the Child Tax Credit or the Recovery Rebate Credit also referred as the stimulus payments. So it used to be if your income was below a certain level you might say hey maybe I won't file because I'm not required to but there are a substantial amount of credits these days which have increased levels of refundability or refundable portions which means that even if your tax liability is zero and you didn't pay any money in you might still get a refund at that point or a benefit program which could be termed as a refund in that case due to some of these credits like the Earned Income Tax Credit, the Recovery Rebate Credit and the stimulus payment which is tied to the stimulus payment and the Child Tax Credits. So quote, there are important changes to the EITC that will help this credit reach more hardworking families this year in quotes that IRS Commissioner Chuck read it quote, we urge people to potentially eligible for this valuable credit to review the guidelines that many people each year overlook this and leave money on the table. On this EITC Awareness Day we want to make sure everyone who qualifies for the credit knows about it and has the information they need to get it in quote, the IRS began accepting 2021 tax returns on January 24th, 2022. Taxpayers can ensure they're getting all the credits and deductions for which they qualify including the EITC by filing their taxes electronically using a trusted tax professional or using an IRS free file partners name brand software. So there's the IRS free file software that that you might want to take a look at. Some of the big brands aren't on I noticed that apparently Turbo Tax isn't on there which is into its brand. I don't think there's an H&R block kind of software on there which I think has a has a purchasable just software component to it. I'm not completely sure on that. So you might think about purchasing those are probably the biggest two if you're doing your taxes on your own which which again you know you they're probably these softwares are probably good too but you might want to purchase those or think about of course talking to a tax professional because again these low income tax credits are confusing. They are not easy. Tax professionals will be using software to calculate them themselves. Nobody does it basically by hand really these days anymore or you know they're if you are you're asking for trouble. I think that I wouldn't want to do it by hand except as an exercise in practice to basically see what's going on with it. So take a look at the software options and the and talk to a tax professional if possible there would be would be good and the two softwares that aren't in this iris free file like a turbo tax or possibly H&R block software probably the biggest you know individual softwares you might want to look into as well. So in any case taxpayers who adjust gross income or AGI is seventy five thousand or less qualified for free file partner offers. The IRS also reminds taxpayers that the quickest way to get a refund is by filing an accurate tax return electronically and choosing direct deposit for their refund tax software tax software tax professionals and other free options can help people see if they qualify for the EITC what's new childless EIT expanded for two thousand twenty one. So obviously the EITC well it's tied to to dependence or children dependent children typically so it usually goes up substantially with the if there's a dependent child and they're saying that more people that don't have a dependent child may qualify for the credit here or should qualify. For two thousand twenty one only more childless workers and couples can qualify for the EITC and the maximum credit in nearly triple for these taxpayers. For the first time the credit is now available to both younger workers and senior citizens for two thousand twenty one. The EITC is generally available to filers without qualifying children who are at least a nineteen years old with earned income below twenty one thousand four hundred and thirty twenty seven thousand three hundred eighty for spouses filing a joint return. The maximum EITC for filers with no qualifying children is one thousand five oh two up from five five hundred and thirty eight in two thousand twenty there are also special exceptions for people who are eighteen years old and were formerly in foster care or are experiencing homelessness full time students under age twenty four don't qualify there's no upper age limit for claiming the credit if taxpayers have earned income in the past the EITC for those with no dependence was only available to people ages twenty five to sixty four income from two thousand nineteen another change in two thousand twenty one allows individuals to figure the EITC using their two thousand nineteen earned income if it was higher than the two thousand twenty one earned income so that's going to be that's a bit of a difficulty because if you're using the same software from year to year and you were able to roll over your taxes from the prior year then the software might be able to take care of that for you and kind of figure that out although you know it might be a little confusing to try to see what you know what it's doing but but if you're using software that you didn't use in the past then you're going to want to have your prior tax return with you because it's possible then that you can say well let's test out the prior year earned income and see if I see if I come to a a better result in terms of a tax result so make sure that you you think about that capability or that possibility that added wrinkle which could be could be substantial in some cases so to qualify for the earned income tax credit people must have earned income through employment or other sources so this option may help workers get a larger credit if they earned less than 20 in two thousand twenty one or received unemployment income instead of their regular wages see the instructions for form ten forty line twenty seven C phase out and credit limits for two thousand twenty one the amount of the credit has been increased and the phase out income limits at which taxpayers can claim the credit have been expanded for instance the maximum EITC for a married couple filing jointly with three or more children is six thousand seven hundred twenty eight dollars and the upper income level for that family that same family is fifty seven thousand four fourteen in two thousand twenty the maximum earned income tax credit for a family and that situation was six thousand six hundred and sixty and the upper income level was fifty six thousand eight forty four taxpayers should also note that any economic impact payments or child tax credit payments received are not taxable or counted as income for purposes of claiming the earned income tax credit eligible individuals who did not receive the full amount of their income pack economic impact payments may claim the recovery rebate credit on their two thousand twenty one tax return see irs dot go forward slash r r for more information two thousand twenty one and beyond a new law changes expanded the EITC for two thousand twenty one in future years these changes include more workers and working families who also have investment income can get the credit starting in two thousand twenty one the amount of investment income they can receive and still be eligible for the EITC increases to ten thousand dollars in two thousand twenty the limit was three thousand six hundred and fifty after two thousand twenty one the ten thousand dollar limit is is indexed for inflation married but separate spouses can choose to be treated as not married for EITC purposes so that's an interesting change right there to qualify for the spout to qualify the spouse claiming the the credit cannot file jointly with the other spouse but must have a qualifying children a child living with them for more than half the year and either do not have the same principal residence as the other spouse for at least the last six months of the year are legally separated so we got the legally separated according to their state law under a written separation agreement or a decree of separate maintenance and not live in the same household as their spouse at the end of the tax year for which the EITC is being claimed so obviously you've got these issues basically in terms of whether they're you know qualifies married or or separate with regards to to claiming these these credits so that can be a area of contention and you might have to pull in the state law requirements for it as well so taxpayers should file schedule EIC form 1040 and check the box showing them as married filing separately with a qualifying child in the past married taxpayers had to file with their spouse to claim the EITC single people and couples with children who have social security numbers can claim the credit even if their children do not have social security numbers in this instance they would get the smaller credit available to child list workers and the past these filers didn't qualify for the credit taxpayers should file schedule EIC form 1040 if they have a qualifying child if they have at least one child who meets the conditions to be their qualifying child for purposes of claiming the EITC they should complete and attach schedule EIC to the form 1040 or form 1040 SR even if that child doesn't have a valid SSN for more information including how to complete schedule EIC if your qualifying child doesn't have a valid SSN see the instructions for form 1040 line 27A and schedule EIC vital refund boost the EITC is the federal government's largest refundable federal income tax credit for low to moderate income workers for those who qualify and if the credit is larger than the amount of tax they owe they will receive a refund for the difference while the majority of those eligible to claim the EITC every year IRS estimates that one of five eligible taxpayers did not claim the credit nationwide last year almost 25 million eligible workers and families received over 60 billion dollars in EITC allowing for the payment of necessities housing and educational training with an average average EITC nationwide of $2,411 for $2,021 the EITC is worth as much as $6,728 for a family with three or more children or up to $1,502 for taxpayers who do not have qualifying children so you can see there's a substantial difference in the ARC if there's qualifying children involved in terms of how much you'll get with regards or in comparison it's going to have a different kind of you can imagine three different curves or four different curves for zero children one children two children three children as your income goes up you get the credit goes up and then caps off if you had three children at $6,728 if you have the maximum amount of earned income before it goes back down if your income goes above that and if you had no children the curve would go up you'd get more of a refund as your earned income goes up and maxes out at $1,502 so look for EITC refunds by early March if no issues with tax return by law the IRS cannot issue refunds before mid February for for tax returns that claim the EITC for the additional child tax credit the the ACTC the IRS must hold the entire refund even the portion not associated with the EITC or ACTC and the recovery rebate credit if applicable so in other words and I believe this is because these these credits are of course the biggest targets for people that are going to try to commit tax fraud and so they're going to want to they got to hold on to the returns a little bit longer hopefully helping them to verify if it's a legitimate claim so that they can then send out the refund so it could be a little bit longer with these credits this helps ensure taxpayers receive the refund they deserve and gives the agency more time to detect and prevent errors and fraud where's my refund on IRS dot gov and the update with prod projected deposit dates for most early EITC and see a CTC refund filers by February 19th therefore EITC slash a CTC filers will not see an update to the refund status for several days after February 15th due to week due to weekends and other factors the IRS express most EITC and a CTC related refunds to be available in taxpayer bank accounts or on debit cards by the first week of March if they choose direct deposit and there are no other issues with their tax return workers who can claim the EITC workers at risk for overlooking this important credit include taxpayers without children including those workers who are at least 19 years old and older than 64 because they weren't eligible in the past they might not be aware that they're eligible now I think is what they're saying living in traditional families such as a grandparent raising a grand child so you might not basically if your grandparents were raising a grandchild they might not really realize that the grandchild would qualify them possibly for the child tax credit I think is what there's trying to say there if you go if you get divorced or something like that then it's likely that you might be more likely to qualify and if obviously you you have a status of a dependent it's more likely with limited English skills who are members of the armed forces living in rural areas who are Native Americans with disabilities or who provide care for a disabled dependent who how to claim the EITC to get the EITC workers must file a tax return and claim the credit eligible taxpayers should claim the credit were below the income requirement to file a tax return free tax preparation help is available online and through volunteer organizations those eligible for the EITC have these options find a trusted tax professional the IRS also reminds taxpayers that a trusted tax professional can prepare their tax returns and provide helpful information and advice tips for choosing a return preparer include certified public accountants enrolled agents attorneys and many others details about national tax professional groups are available on irs dot gov EITC recipients should be careful not to be duped by unscrupulous unscrupulous return preparer so remember these credits are valuable and you know you can so it's going to heighten fraud fraud attempts which could include people trying to make unscrupulous people trying to oppose this as return preparers and trying to get a piece of the piece of the refund in some way shape or form so free file on irs dot gov free brand name tax software is available that leads taxpayers through a question and answer format to help prepare the tax return and claim credits and deductions if they're eligible free file also provides online versions of irs paper forms an option called free file fillable forms best suited for taxpayers comfortable preparing their own returns free tax preparation workers can seek free tax preparation at thousands of volunteer income tax assistant V.I.T.A. and tax counseling for the elder the T.C.E. sites to locate the nearest site use the search tool on irs dot gov the irs to go smartphone application or call toll free 800 906 9887 taxpayers should bring all required documents and information the irs reminds taxpayers to be sure they have valid social security numbers for themselves if filing a joint return and for each qualifying child claim claimed for the E.I.T.C. the SSN social security number must be issued before the due date of the return including extensions there are special rules for for those in the military or those out of the country avoid errors taxpayers are responsible for the accuracy of their tax return even if someone else prepares it for them since the rules for claiming the E.I.T.C. can be complex the irs urges taxpayers to understand all of them people can find help to make sure they're eligible for visiting a free file return preparation site or using free file software or by using a paid tax professional beware of scams be sure to choose a tax preparer wisely beware of scams that claim to increase the E.I.T.C. refund scams that create fictit fictitious qualifying children or inflate income levels to get the maximum E.I.T.T.C.C. could leave taxpayers with a penalty visit irs online irs.gov is a valuable first stop to help taxpayers get it right this filing season information on other tax credits such as the child tax credit is available related items E.I.T.C. central quality helpful resources for irs partners and others publication 596 earned income tax credit E.I.C. tax professionals another place for valuable I.E.I.T.C. resources and assistance there's links to all that stuff here and they'll be a link to this and the description