Benjamin Franklin said “Nothing can be said for certain, except death and taxes.” With tax season fast approaching, and all the frustration that comes with that, death seems like the more pleasant of the two. The tax form makes every step seem intimidating, and the instructions, which are designed to help, only make things harder.
Take for example, the Earned Income Tax Credit. Many taxpayers have a hard time figuring out if their even eligible for it. And the form, with its steps and sub-steps and worksheets divided into parts, doesn’t make anything look easier.
This tax credit is designed to help working class families make ends meet. As the instructions explain, his excludes people who make more than $3,200 in investment income. It also excludes nonresident aliens, people who don’t have a valid Social Security number that allows them to work in the US. It excludes people who are marked down as someone else’s qualifying child. Furthermore, it excludes people who earned enough foreign income to file a 2555 or 2555EZ.
People who work legally in the United States, and only in the United States, who don’t get more than $3,200 in investment income, need to figure out two things to determine if they’re eligible: their adjusted gross income, and how many qualifying children they have.
According to the IRS website, Adjusted gross income is your total income, minus adjustments. It can be found on line 38 of the 1040, line 21 of the 1040A, and line 4 of the 1040EZ.
The instructions list many types of people that can be considered “qualifying children.” Children under 19 and younger than the taxpayer might qualify. Children under 24 who are enrolled in school and also younger than the taxpayer also might qualify. And someone who is permanently disabled could also be a qualifying child.
However, all qualifying children must meet certain criteria. They must be in the United States legally, with a valid social security number. They cannot be filing a joint return with someone else. They must have lived with you for more than half of 2012. And they must be the taxpayer’s son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, half-brother, half-sister, or a descendant of any of those.
Taxpayers who have no qualifying children must have an adjusted gross income of less than $13,980, or less than $19,190 if they are married and filing jointly. They must be between the ages of 25 and 64 (including both 25 and 64.) They must also live in the United States for half of 2012, or have been serving in the military and living outside the US for that reason. And if someone else can claim the taxpayer as a dependent, then that taxpayer does not get the Earned Income Tax Credit.
Taxpayers with one qualifying child must have earned less than $36,920, or less than $42,130 if they are married and filing jointly. Taxpayers with two qualifying children must have earned less than $41,952, or less than $47,162 if they are married and filing jointly. And taxpayers with three or more qualifying children must have earned less than $45,060, or less than $50,270 if they are married and filing jointly.
To the people who meet those requirements, congratulations! You are eligible for the Earned Income Tax Credit.