The earned income tax credit has been helping low-to-moderate income workers make ends meet for 40 years. If you qualify, you may get a refund of up to $6,242 even if you owe no income tax. In 2014, almost 28 million individuals and families received more than $66 billion in EITC, with the average credit being $2,447. Still, despite the credit’s value, one in five eligible workers does not claim it.
Here are some facts you should know about the credit and about determining your eligibility. The EITC is a refundable credit. If you qualify, the credit will reduce your tax liability dollar-for-dollar. If the credit amount is greater than your tax liability, or if you have none, the IRS will send you a check. But you must file a federal tax return to get the credit, even if you are not otherwise required to file.
How can you tell if you qualify? First, you must have earned income. You can work for an employer, or you can work for yourself, but you must have earned at least $1 and not more than $53,267 in 2015. Distributions from retirement accounts and unemployment benefits do not count as earned income, and you cannot have much investment income. The amount of your credit will depend on your income, filing status, and family size. While you don’t need to be married, or have children, to claim the credit, it is more valuable for families with children. If you are married, you must file a joint return. If you and your spouse file separate returns, neither will qualify for the credit. You must also meet age, residency, and dependency tests, or have a child who meets all the qualifying child rules. And each of you must have a Social Security number that is valid for employment.
And here is more good news — you don’t need to hire a return preparer to calculate your credit. You can do it yourself using the 2015 EITC Assistant tool at IRS.gov. You can also file your return for free on IRS.gov/freefile, and the software will compute your credit amount, or you might find help through the Volunteer Income Tax Assistance program. To find a nearby VITA site, visit IRS.gov. The fastest way to get a refund is to e-file and choose direct deposit, as it takes the IRS longer to process paper returns. Finally, you can track the status of your refund with the “Where’s My Refund?” tool available on IRS.gov or on the smarthphone app IRS2Go.