Find Out What the Earned Income Credit (EIC) Can Do For You When Tax Time Comes!
Authored By: Iowa Legal Aid
What is the Earned Income Tax Credit?
The Earned Income Tax Credit is sometimes called EITC or EIC. It is a refundable federal income tax credit to help you keep more of what you earned. If you worked in 2012 – full-time or part-time – you may qualify. Even if you don’t owe income tax, you may get the credits.
Who Can Get the EIC and what are the amounts for Tax Year 2012?
If you have qualifying children, you can get up to $5,891 in the EIC.
- Families with one child who earn less than $36,920 in 2012 (or less than $42,130 for married filing jointly status workers) are eligible for a credit of up to $3,169.
- Families with two children who earn less than $41,952 in 2012 (or less than $47,162 for married filing jointly status) are eligible for a credit of up to $5,236.
- Families with three or more childrenwho earn less than $45,060 in 2012 (or less than $50,270 for married filing jointly status) are eligible for a credit of up to $5,891.
- If you are a worker without children, you can get up to $475.
- Workers without a qualifying child who earn less than $13,980 in 2012 (or less than $19,190 for married workers) are eligible for a credit of up to $475.
- No more than $3,200 of earnings can be Investment Income.
How Can I figure Out How Much I Could Get from the Earned Income Tax Credit?
The Internal Revenue Service has an EITC Assistant on their web site to help you figure out what the Earned Income Credit would be for you, based on your income and family size.
Here is the url of the EITC Assistant: http://www.irs.gov/individuals/article/0,,id=130102,00.html .
The information is normally updated in January of each tax year.
What Children Qualify?
Qualifying children must have lived with you for more than six months during the tax year. The children must be under age 19, or under age 24 if they are full-time students. This includes:
- Sons, daughters, stepchildren, grandchildren and adopted children.
- Brothers, sisters, stepbrothers and stepsisters - and the children of any of these.
- Foster children who are placed with you by an authorized government or private placement agency also qualify. The children must be under age 19, or under age 24 if they are full-time students.
- Totally and permanently disabled children of any age are also qualifying children.
The taxpayer and the children claimed for the earned income credit must have Social Security numbers valid for employment.
ANOTHER IMPORTANT CREDIT for which you may qualify:
Child Tax Credit = up to $1,000 per child under age 17.
Workers must earn over $3,000 in 2012 to qualify for the additional refundable Child Tax Credit.
How Do I Get the Earned Income Credit?
You must file a tax return.
- If you were raising children, you need to file a Federal 1040 or 1040A (not the 1040EZ) income tax return.
- If you are a married couple, you must file a joint return.
- Taxpayers filing married filing separately cannot claim the EIC. (See exception for separated parents who can use head of household filing status.)
- If your spouse died in 2010, you remain unmarried and have a qualifying child, you can file and claim the EIC using the qualifying widow(er)status for tax year 2011 and 2012.
- If you are an unmarried parent who does not pay more than half of the costs to maintain the family home, you can file as single and still claim the Earned Income Credit for your qualifying child. Some single parents mistakenly believe they must use the head of household status when claiming the EIC, which can unnecessarily trigger an audit particularly if their income is very low.
- Parents with children must file a form called the Schedule EIC with your tax return. You need to fill out only the front side of this Schedule EIC, and the IRS will calculate the exact amount of the credit on the back side. If you do not file the Schedule EIC, you will not get the Earned Income Credit.
- If you were not raising children, you can file a return using any tax form including the form 1040EZ to claim the EIC. You do not have to file a Schedule EIC. If you qualify, you can write EIC next to the line that says Earned Income Credit and the IRS will calculate the credit for you.
What if I Am Self-Employed?
You are eligible for the EIC, but you must fill out a special series of forms: Schedule C or Schedule C-EZ, Schedule SE, Form 1040, and Schedule EIC (if you were raising children in your home). Call the IRS to get the forms or go online.
You need to carefully include all income and expenses for your business. Gather all business related receipts, bank statements, mileage records to accurately fill out these forms.
What If I Am a Permanent Resident Alien Who Is Working in the U.S.?
The EIC is available to taxpayers who have a Social Security number and have a child who has a Social Security number. All Social Security Numbers must be valid for work. The taxpayer must have been a U.S. resident alien for tax purposes the entire year, and the child must have lived with the taxpayer for more than six months in the United States. If the taxpayer is married and lives with his or her spouse, the spouse must also have a social security number.
What If the Parents Are Divorced or Separated?
If you are divorced and a custodial parent you may be able to claim the EIC for your qualifying child even if the non-custodial parent has been granted the right to claim the qualifying child’s dependency exemption. Under the tax rules, a custodial parent is the parent the child lives with the most days during the year. A non-custodial parent may qualify for the smaller EIC for workers without children.
If you separate from your spouse for the last six months of the year and you pay more than half the costs for maintaining a household for your qualifying child, you may claim the EIC using the head of household filing status. If the other parent has no children living with him or her, the only available filing status is married filing separately and therefore he or she is not eligible for the EIC.
What if the Parents Live Together But Are Not Married?
Either parent may claim the Earned Income Credit. If both parents claim the credit, the IRS will decide who receives the credit. The parent with whom the child lived the most during the tax year will receive the credit. If they both lived with the child the same amount of time, the credit will go to the parent with the highest adjusted gross income. The parents should discuss how to claim the earned income credit to make sure the family gets the biggest credit permitted by the laws.
What If I Have Not Claimed the EIC in the Past?
You can go back and claim EIC payments for the last three years.
- If you filed taxes in 2009, 2010 or 2011, but did not claim the earned income credit and you have learned you were eligible, you can file amended returns.
- If you did not file a tax return for those years, you will have to get returns on file. This is in addition to anything you may be eligible for in the current tax year.
Therefore, you can get payments for the tax years 2009, 2010, and 2011 plus your 2012 return if you have not filed federal income tax returns during those years and you were eligible for the EIC.
For 2009, you must have the return on file no later than the due date for the 2012 tax return in order for it to be considered timely. You will need to get a Form 1040 or 1040A for those years. You can get these forms (and any other forms) by contacting the IRS at 1-800-829-3676 or by going to www.irs.gov. Select Publications and Forms, previous years.
Can I Get the EIC with Electronic Filing?
- Electronic filing with direct deposit is the fastest way to get your refund.
- You can get the refund in as little as 10-15 days.
- Lower- income taxpayers can go to one of your local free tax assistance sites to get this service for free. You can locate a local Volunteer Income Tax Assistance site by calling the IRS at 1-800-829-1040 or an AARP Tax Counseling program at
- In most areas, 211 should be able to provide you with this same information.
Does the Earned Income Credit Affect Public Assistance?
EIC payments are not income for the purposes of FIP (AFDC), Medicaid (Title 19), food stamps, SSI, or public/subsidized housing in the month received. That means the Earned Income Credit will almost never affect your eligibility for these programs or the amount of benefits you get. The EIC may be counted as a resource in the following months depending on the rules for the individual program.
Where Can I Get More Information?
- For more information on tax rights and responsibilities, including more information about the Earned Income Credit, contact Iowa Legal Aid.
- If you have tax problems, you may be able to get help from Iowa Legal Aid’s Low-Income Taxpayer Clinic. Call Iowa Legal Aid at 1-800- 532-1275.
- To locate Free Tax Preparation sites for most communities, you can call 2-1-1 starting in late January.
- You may also contact the IRS. If you live in Iowa, contact the IRS at 1-800-829-1040, and if you live in Des Moines, contact the IRS at (515) 283-0523. Persons with a hearing impairment who have access to TTY equipment may call the IRS number: 1-800-829-4059.
The information in this article was not intended or written to be used and cannot be used to avoid penalties under the Internal Revenue Code.
Last review 11/29/12