6 Rules of Earned Income Credit

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Here is what you need to know

In two short weeks, 45% of Americans will be filing their 2017 Income Tax and about 26 million tax payers will qualify for Earned Income Credit. According to Nerd Wallet, 1 out of 5 eligible workers fails to claim EIC. What's worse than paying taxes throughout the year? Leaving money on the table when you file for your return. 

What if i make a mistake?

If there is any mistakes filing for the EIC, the IRS will disqualify the claim and you will not receive your credit. The IRS will make you pay back any EIT amount you have been paid in error, plus interest. Also, you may need to fill out extra forms to claim EIC in the future. Believe it or not but the IRS doesn't like funny business when it comes to claims. The IRS could ban you from claiming EIC for 10 years if they find you filed "reckless or intentional disregard of the rules". 

1

Did you know you can qualify for earned income credit if you do not have children? Depending on what your income was for 2017 and age, you may qualify for this credit. Here are the  adjusted gross income guidelines:

  • Filing single with an income of $15,010 ($20,600 married) with no children between the ages of 25-65
  • Filing single with an income of $39,617 (45,207 married) with one qualifying child
  • Filing single with an income of $45,007 ($50,597 married) with two qualifying children
  • Filing single with an income of $48,340 ($53,930 married) with three or more qualifying children

2

So, you have to have earned income to qualify for the EIC and have a social security number.  Any children listed on the Schedule EIC must also have a SSN by the time you file. If their is a missing SSN on the tax return, you may not get the EIC and you can not electronically file the return. If you have something called an Individual Taxpayer Identification Number, you may not qualify for the EIC.  Its very important to double check all of the information you have BEFORE filing. Tax preparers are bread to punch in numbers. They will do the double, triple checking for you so you don't have too. 

Did you apply for a SSN and havent received it yet? You may request for a six-month extension to file your return. Ask your preparer to do this for you. 

3

For married tax payers, you must file joint to get your EIC. filing separately will disqualify you for the credit. However, if you and your spouse have lived separately for 6 months in 2016 you may be able to file as "head of household" instead of filing separately. 

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4

This may seem obvious but you must be a resident of the united states to file for the EIC. If you are a resident outside of the United States for any part of last year, you cant claim the earned income credit unless your spouse is residing in the USA and you are filing jointly. If you need more information, contact

5

For foreign earned income there is a file Form 2555. If you filled this form you can not file for EIC. 

6

Lastly, you can claim the EIC if your investment income is at $3,450 or less for the year. If you're investment income is more than $3,450, you cant claim the EIC.