 Ingeneral Revenue Service IRS tax news changes to the earned income tax credit for the 2022 filing season but first an attempt at a joke I apologize in advance. Dr. Fauci fighting back against people that will not recognize him as science incarnate. Exclaiming why can't people just recognize my truth? What's it matter to you? Well you do seem to be mandating us to do stuff like wear ineffective masks stop educating kids close our businesses and so on and so forth that stuff kind of has an impact oh what's the big deal you currently wear pants in public and kneel before god facial coverings and kneeling before science incarnate it's basically the same thing well no it's not really you're just a science denier no but i would call myself a science incarnate denier there is a difference words matter and yours too often seem intentionally designed to deceive as you flat out told us on multiple occasions i think i'm just gonna stop listening at this you can't do that as science incarnate i declared that anybody who stops listening to me has a serious medical condition you sir are a sound of foam look it up in the dictionary we should have a definition modified or made up within three days anybody who does not listen to me scratch that anybody that doesn't enjoy listening to me with devotional fondness is a sound of hope a sound of phoba it doesn't seem like you have the proper type of medical credential to make that kind of diagnosis oh i assure you i have all the scientific authority i need given by politicians to slander anyone i mean diagnose anyone i want in any way i want and you sir you're just a sound of foam well i guess being a sound of fobs not the worst thing i've ever been called i thought you're gonna call me a racist or something like that no you're just a sound of fob i see well i guess that's not that bad yes and being a sound of fobs worse and hitler wait a second covid tax tip 2022-31 february 28 2022 the eitc the earned income tax credit is one of the federal government's largest refundable tax credits for low to moderate income families so when they say it is refundable that means that if your tax liability goes below zero you still get money in other words a refund but not really a refund because it's kind of like a benefit program at that point the earned income tax credits one of the most complicated tax credits to come to calculate so it's useful to have tax software which you might be able to get for free with a free file software if your income is below a certain threshold the idea of the earned income tax credit and one of the reasons it's more complicated one of the reasons that economists like it at the same time is that it's an attempt to give a benefit to people that need the money while not disincentivizing people to be able to go out and work and support themselves like many kind of benefit programs do because once you sign up to the benefit program you lose the benefits oftentimes once you start working not the case so much with the earned income tax credit because it actually goes up meaning the benefit actually goes up as your earned income something like w2 income for example goes up to a certain degree plateaus off and then it starts going back down the attempt there being to incentivize work up to at least a certain point instead of disincentivizing however that also makes it a lot more complicated you also have a situation where they tied in the dependents along with it as well so there's different kind of schedules that are going to be related to if you don't have any dependents or if you have like three qualifying dependents for the earned income credit which also adds to the level of complication people have talked many times about possibly decoupling those things the dependents versus the earned income us components of them but in any case that's where we stand there's also some other changes that happened with regards to possibly being able to use prior year income which again could be beneficial but complicated in terms of the credit calculation so the recent expansion of this credit means that more people may qualify to have some much needed money put back into their pockets the irs urges people to check to see if they qualify for this important credit while people with income under a certain amount aren't required to file a tax return because they won't owe any tax those who qualify for the eitc earned income tax credits may get a refund if they file a 2021 tax return here's an overview of the recent notable changes to the eitc earned income tax credit for tax year 2021 only expanded eitc for people who do not have qualifying children so oftentimes if you don't have qualifying children you still get it but or you could get it or you may qualify for it however the the amount of the benefits are substantially lower so they kind of adjusted that apparently at this point so more workers without qualifying children can qualify for the eitc and the maximum credit amount is nearly triple for these taxpayers this year for the first time the credit is now available to both younger workers and senior citizens there is no upper limit upper age limit for claiming the credit if taxpayers have earned income so there used to be a more restrictive kind of age requirement and so they're talking about the age limit on the upper side of things in terms of being able to qualify the eitc earned income tax credit is generally available to workers without qualifying children who are at least 19 years old with earned income below 21,430 for those filing a single and 27,384 for spouses filing a joint return the maximum credit for taxpayers with no qualifying children is $1,502 in other words there are also special exceptions for people who are 18 years old and were formerly in foster care or are experiencing homelessness full-time students under age 24 don't qualify some taxpayers can use the 2019 earned income to figure their eitc earned income tax credit this gets kind of complicated too so taxpayers can elect to use their 2019 earned income to figure their 2021 earned income credit if their 2019 earned income is more than their 2021 earned income so you might say well why in the world would I want to use my 2019 income if it was more than 2021 income because usually income for taxes is bad because for taxes if you have income that usually means that you're going to be paying taxes on it and that's usually what's going to trigger the decreasing of things like credits so why would I want to pick up the income if I had the option to if it was higher because the earned income tax credit is designed to try to incentivize work so it actually goes up as your earned income goes up up to a certain degree we'll level off and then go back down and because of the pandemic they thought that well maybe people couldn't work at all they didn't have the option to work and therefore what we want to do is give you the option then to use the 2019 earned income if you were to able to work in 2019 and not 2020 so again it should be a beneficial thing and you've got to test it out to see if it would be a beneficial thing or not you can like run it in tax software which is very helpful to see if that's going to be beneficial or not but of course it's complicated that's going to add a significant level of confusion to the calculation of the credit at the same time so keep that in mind I would use software to help you out with that this option if you have the same software by the way as the prior year you might be able to roll over the prior year and it might do some of these calculations for you depending on the kind of software that you're using but in any case this option may help workers get a larger credit if they earned less than 2021 from employment. Taxpayers can review the line 21c of the instructions for form 1040 so there's a link to those instructions here for more information. Phaseouts and credit limits for 2021 the amount of the credit has been increased and the phaseout income limits have been expanded. Any third round economic impact payments or child tax credit payments received are not taxable or counted as income for purposes of claiming the EITC earned income tax credit. People who aren't missing a stimulus payment or got less than the full amount may be eligible to claim the recovery rebate credit on their 2021 tax return. Remember we're talking here about the third stimulus payment the first two would have to be going back to the 2020 tax return not the 2021 tax return we're talking about here which is going to be filed by April 18th generally of 2022. New law changes expand the EITC earned income tax credit for 2021 in future years these changes include more workers and working families who also have investment income can get the credit starting in tax year 2021 the amount of investment income they can receive and still be eligible for the EITC earned income tax credit increases to $10,000 after 2021 the $10,000 limit is indexed for inflation. Married but separate spouses can choose to be treated as not married for purposes of claiming the EITC earned income tax credit. This is an interesting change it's an interesting area because obviously the earned income tax credit being a very significant credit can work or has been in the past working in a way that it could actually disincentivize marriage because the marriage once you're married you don't have the same kind of possibly ability to claim the earned income tax credit if you file for example married filing separate married filing separate in other words usually has lesser of the ability to claim certain credits than say single or head of household that you would have if you are not married which could disincentivize marriage in some cases and and lower income families which doesn't seem like results you would want typically from the tax code so in any case to qualify the spouse claiming the credit cannot cannot file jointly with the other spouse they must have a qualifying child living with them for more than half the year and either did not have the same principal residence as the other spouse for at least six months out of the year so note they're still saying you know it's kind of like they're legally separated here which is one of the one of the conditions you often have with with regards to taxes whether or not you have to file married or married filing separate or whether you're not married in which case you'd be choosing generally between single and head of household but then the question is well what qualifies as marriage you know what kind of circumstances would qualify you to go into marriage obviously getting married would be the formal circumstance but is there any living conditions that would qualify for people being married at some point in time after a certain time and then what qualifies for basically separation or divorce and for that oftentimes you have to go to like state law and think about what the state law will be saying to see if you're legally separated or whatever to be able to file to file and and and look at some of these kind of benefits you might get for things like credits that you wouldn't possibly normally get if you're just normally a married filing separate tax return so if you're in that situation take a look at it get a little bit more research on it are legally separated according to their state law under a written separation agreement or divorce 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 taxpayers should file schedule EIC form 1040 there's a link to that here and check the box showing them as married filing separate with qualifying child 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 will get the the smaller credit available to workers who do not have qualifying children taxpayers should complete schedule EIC earned income credit and attach it to the form 1040 or 1040 SR if they have at least one qualifying child even if the child doesn't have invalid SSN social security number for more information taxpayers should review the instructions for form 1040 line 27 a and schedule EIC so there's links to some of this stuff here there'll be a link to this in the description