When determining the amount of tax you need to pay each year, the government is required to take your income earned from all sources and work out how much of that should be paid in tax. However, you can reduce the income total by taking advantage of various tax credits. The Earned Income Tax credit (EIC) is one of these. Our calculator helps you to work out if you are entitled to this tax credit and the impact that it will have on your tax payments for the year. Even if your income means that you do not need to file a tax return or you qualify for the simplified 1040EZ form, you should still check to see if you could claim EIC as you may be entitled to a tax refund based on the credits you are entitled to.
Who is the EIC for?
The EIC is designed for people who are on a low to medium income and only applies to people who meet certain criteria. These rules include;
1. You must have a social security number that is valid for employment
2. You need to be filing as a single person, as head of the household, as a widow or widower or as a married person completing a joint return
3. Your income for the year needs to be less than the current limit for the year which varies according to circumstances but is usually less than $53,000 (but needs to be more than $1). You also need to have earned less than $3,400 in interest on investments during the year.
4. You must be a US citizen or resident alien for the entire year.
5. You must have a qualifying child, or be aged between 25 and 65.
If you have children, the amount you can earn will be substantially more than if you do not and the more children you have the more income you can earn before you need to move to the more complicated forms required for your taxes. Your child needs to live with you and be aged under 19 or be a full-time student and aged under 24. There are special rules for disabled children and similar dependants.
Your earned income includes money you are earned from a variety of sources. This includes wages salaries and tips, strike benefits, disability benefits and any earnings from self-employment. People in the armed forces may also be eligible for this tax credit but they must include their entire combat pay in their return.
Is it easy to claim EIC?
Claiming for EIC is simple but requires you to file a Federal tax return. If you do not have a child you need to use the 1040EZ form, or if you have children the 1040A or 1040 forms will be suitable. In many cases, the simple 1040EZ form is perfect - especially if you only have basic tax affairs.
Once you have used our EIC calculator to work out if you should qualify for this tax credit you can easily fill in the tax return yourself. You will need to ensure you have some basic information including your personal details, the details of your dependants, your income details from all sources, your expenses for the year relating to mortgage interest, tuition and other taxes and of course any other forms you need to file. Don’t forget that even if you didn’t apply for the EIC in previous years, it is possible to backdate it for two years and could result in a tax refund.
Using the Earned Income Credit (EIC) Calculator
Our Earned Income Credit (EIC) Calculator is designed to help you work out if you are eligible for a tax credit that could result in a tax refund. Even if you are on a low income, or welfare, you could get money back that could invaluable. Taking the time to discover if you can claim this credit is important and with our calculator, it is also easy.
The first part of our calculator asks some very basic questions that you should be able to answer with only the minimum of paperwork. This includes whether you are single or married, the number of children you have (check the rules to see if those children qualify) and of course the income you have earned for the year. You can then add any scholarships or retirement income, any combat pay (this is non-taxable) and any investment income. The result is your gross income that has been adjusted by all of these factors.
We will also ask a few more qualifying questions about your age, whether you or your spouse could be a qualifying child, what your residential status is and if you might be a dependent for someone else.
The final part of the calculator shows the amount of tax credit that you will be entitled to claim for, based on the information you have supplied. This tax credit can then be taken off your current tax bill and reduce the amount you need to pay. Alternatively, it can be returned to you as a refund if you do not currently need to pay tax.
Even if you don’t need to file a tax return, it is very important that you check your eligibility for an earned income credit. It could be the difference between a refund and getting nothing at all. Our calculator makes it even easier to find out your eligibility quickly and easily, without needing to read through the government websites and advice.