Do I qualify for Earned Income Credit?

Earned Income Tax Credit (EITC) is and federal tax credit that is available for a working family or individuals; the credit is based on their income earned and number of their dependents, if any.  The families or individuals who are eligible to receive EITC should meet the following requirements:  earning certain amount of moderate income, and /or have one or more dependents.  In 2012, the maximum credit is available for working families or individuals with up to three dependents.

EITC is a refundable credit.  This means that it can exceed the amount of total tax for the year and the taxpayer would get money in addition to what he originally paid in.

Eligible dependents include children till the age of 19, or full time students till the age of 24. Non taxable scholarships received by the dependents who are full time students, won’t affect the EIC, but taxable  scholarships will increase the amount of income received by the parents, therefore, effecting the eligibility for EITC.

To qualify for EITC, the taxpayers, their spouses and children need to be US citizens or residents. However, if the taxpayer is a US citizen married to a nonresident alien, he may be eligible for EITC as well.  Qualifying income is any income earned by the taxpayers if working for someone else, or by running their own business, cash and tips income are included in the calculation as well.

Certain benefits from union strikes and disability benefits can count as a taxable earned income towards the calculation of EITC.

To be eligible for the EITC you have to be between the ages of 25 and 65, live in the United States for more than six months, and not be a dependent of someone else. Only qualified children are eligible dependents for EITC purposes.

Qualified dependents can be taxpayer’s children, adopted or fostered children, brothers or sisters, nieces or nephews of the taxpayers; they also must live with taxpayers for more than six months.

If you have more questions about your eligibility for EITC or any other tax or accounting matters, please call Your LA CPA Inc at 323 851-1707. Our associates will help you.

Thank you for reading….

Best Regards,

Is a Certified Public accountant.  His practice is located in Los Angeles, California and he specializes in small business taxation, various types of real estate transactions, as well as entertainment clients.  He is a member of California Society of Certified Public Accountants.  Dmitriy is a principal and co-founder of Your LA CPA, Inc. 

Reference:

http://www.irs.gov/Individuals/EITC,-Earned-Income-Tax-Credit,-Questions-and-Answers

http://www.irs.gov/Individuals/EITC-For-Individuals

http://tax.laws.com/earned-income-tax-credit