Earned Income Credit (EIC): What Is It?
In the world of taxes, tax credits help taxpayers to lower their tax bill. One such credit is the Earned Income Credit, or EIC. This credit was instituted as a way to help low income wage earners to rise above their circumstances.
Set up in the year 1975, the concept behind the earned income credit was that since poor workers were having to pay so much in income taxes that they could never hope to move up the financial ladder they needed to be able to pay less taxes. By means of the EIC, low income families are given back a large amount of the money that has been deducted from their pay because of taxes throughout the year.
The amount of the earned income credit has increased over the years. Those who fought for the tax credit agree that it is a better way to help people living in poverty than trying to raise the minimum wage. People that receive the tax credit sow that money back into the economies of their neighborhoods where it helps everyone.
There are three types of EIC eligible incomes. The first is money that is earned at a job. This money would include any wages earned by means of tips. If you are given a bonus by your employer, it can also be counted towards the earned income credit.
Secondly, there is money earned as a self-employee. People can own their own business and still not be able to make ends meet for themselves or their families. Every penny earned through the business is considered in the earned income credit equation.
Any money earned by one of your dependents can also be used to obtain the EIC. For example, the money that your teenage son or daughter makes while working summers or before and after school can be counted by you in order to get the earned income credit. This is true even if they have not earned enough to have to file for taxes themselves. The combined total of your income and your children's will be used to determine your EIC.
The IRS also counts any income from investments as income earned. If you have money made from investments or drew unemployment for a time during the year, this will affect your chances of receiving the earned income credit. Investment money earned which is over $2,800 can disqualify a taxpayer from the earned income credit.
Each year thousands of dollars in earned income credit go unclaimed. Filers either don't know about the tax credit or they don't think that they will qualify. Not having to file a return doesn't mean that the tax credit doesn't apply to you. Even if your income is below the amount that which is required for filing a tax return, you may still qualify for the earned income credit. Don't sell yourself short. You could be passing up thousands of dollars that is yours under this tax credit.
Set up in the year 1975, the concept behind the earned income credit was that since poor workers were having to pay so much in income taxes that they could never hope to move up the financial ladder they needed to be able to pay less taxes. By means of the EIC, low income families are given back a large amount of the money that has been deducted from their pay because of taxes throughout the year.
The amount of the earned income credit has increased over the years. Those who fought for the tax credit agree that it is a better way to help people living in poverty than trying to raise the minimum wage. People that receive the tax credit sow that money back into the economies of their neighborhoods where it helps everyone.
There are three types of EIC eligible incomes. The first is money that is earned at a job. This money would include any wages earned by means of tips. If you are given a bonus by your employer, it can also be counted towards the earned income credit.
Secondly, there is money earned as a self-employee. People can own their own business and still not be able to make ends meet for themselves or their families. Every penny earned through the business is considered in the earned income credit equation.
Any money earned by one of your dependents can also be used to obtain the EIC. For example, the money that your teenage son or daughter makes while working summers or before and after school can be counted by you in order to get the earned income credit. This is true even if they have not earned enough to have to file for taxes themselves. The combined total of your income and your children's will be used to determine your EIC.
The IRS also counts any income from investments as income earned. If you have money made from investments or drew unemployment for a time during the year, this will affect your chances of receiving the earned income credit. Investment money earned which is over $2,800 can disqualify a taxpayer from the earned income credit.
Each year thousands of dollars in earned income credit go unclaimed. Filers either don't know about the tax credit or they don't think that they will qualify. Not having to file a return doesn't mean that the tax credit doesn't apply to you. Even if your income is below the amount that which is required for filing a tax return, you may still qualify for the earned income credit. Don't sell yourself short. You could be passing up thousands of dollars that is yours under this tax credit.
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