Refundable Tax Credits
What is the Earned Income Tax Credit (EITC)?
The Earned Income Tax Credit (EITC) is a refundable federal tax credit that reduces or eliminates the taxes that low-income working people pay (such as payroll taxes) and also frequently operates as a wage subsidy for low-income workers.
Who qualifies for the Earned Income Tax Credit?
Taxpayers must have a Social Security Number, work full- or part-time and have earned income of at least $1.00. Income and family size determine the amount of EITC. Investment income is less than $3,100. Income thresholds for tax year 2009 are listed below:
- Families with three or more qualifying children who earn less than $43,279 ($48,279 married filing jointly) may be eligible for a refund up to $5,657.
- Families with two qualifying children who earn less than $40,295 ($45,295 married filing jointly) may be eligible for a refund up to $5,028.
- Families with one qualifying child who earn less than $35,463 ($40,463 married filing jointly) may qualify for a refund up to $3,043.
- Workers between the ages 25 and 64, without children who earn less than $13,440 ($18,440 married filing jointly) may qualify for a refund up to $457.
NOTE: These tax credits do not count as income in determining eligibility for public benefits like food stamps, SSI, TANF, Medicaid, and public housing.
What is the Child Tax Credit?
The Child Tax Credit is a federal tax credit worth up to $1,000 in 2009 for each child under age 17 and can be claimed as a dependent on the worker’s tax return. The Child Tax Credit is refundable, meaning some families can get the credit even if they owe no income tax. Eligible families can receive the Child Tax Credit refund in a check from the IRS.
Who qualifies for the Child Tax Credit?
To be eligible for the Child Tax Credit, a single or married worker must:
- Be able to claim an exemption for a dependent child under age 17 on his or her tax return;
- Have taxable earned income above $3,000; and
- Have either a social Security Number or an Individual Taxpayer Identification Number.
How to file for the tax credits?
To file for the Earned Income Tax Credit with dependents (single or married), file federal tax return Form 1040 or 1040A. For those with no dependents (single or married), use form 1040EZ if you are eligible to use this form. Attach “Schedule Earned Income Tax Credit” with your tax return.
To file for the Child Tax Credit, same requirements stated above but attach “Form 8812” with your tax return.
Additional Links
For more information contact Delverne Seaman at 208-785-0059 or delvernes@p4peid.org
C.A.S.H. Campaign
What is Partners for Prosperity doing to promote awareness of the Earned Income Tax Credit?
Partners for Prosperity has created the coalition for the C.A.S.H. (Creating Assets, Savings and Hope) Campaign. The purpose is to build partnerships with community service organizations, government agencies, and employers to increase awareness to working individuals and families of the Earned Income Tax Credit (EITC) and other credit. We also strive to link financial education and wealth-building programs to qualifying tax filers. Statistics show that many people in Eastern Idaho who qualify for the EITC do not apply. This means literally thousands of dollars are lost to working individuals and families.
Why is the Earned Income Tax Credit important in reducing poverty?
As an organization dedicated to reducing poverty in Eastern Idaho, Partners for Prosperity recognizes the economic significance that the EITC plays in lifting people out of poverty. Shown to be the largest poverty reduction program in the United States, the EITC lifted 5 million people above the federal poverty line in 2004. While this statistic is significant, research suggests that many low to moderate working people in Eastern Idaho who qualify for the EITC do not apply. This means thousands of dollars lost to low-income individuals in our region. Not only does the EITC help working individuals and families, but many economists suggest that the multiplier effect of the EITC is between 1.5 to 2 times the original amount in terms of the impact it has on the local economy. This means that local communities also benefit from the EITC by improving their economic condition. EITC information referenced from http://en.wikipedia.org/wiki/EITC
What are some ways that Partners for Prosperity is linking the Earned Income Tax Credit to other wealth building programs and opportunities?
Partners for Prosperity understands that to create long-term systemic poverty change, low-income individuals need strong financial skills and an opportunity to own assets. As part of the C.A.S.H. campaign, the coalition has worked to develop strategies in which low-income individuals who qualify for the EITC are linked to existing financial education courses and workshops. In addition, other linkages with those qualifying for EITC are made to wealth building programs such as Individual Development Accounts (IDA’s). IDA’s are a matched savings program that allows low-income individuals to save for specific purposes such as home ownership, post-secondary education, and small business development. These linkages create greater opportunities for those who qualify for the EITC to get out and stay out of poverty.
Are there other services in the community that working individuals and families can take advantage of during tax season?
Partners for Prosperity and the coalition for the C.A.S.H Campaign are also working to increase public awareness and utilization of no-cost tax services provided to low-income individuals, families and seniors by the AARP Tax-Aide. These free tax services are provided in communities across eastern Idaho. For dates, times, and locations of AARP Tax-Aide preparation sites, call the Idaho Careline at 211. In addition, filers should consider having their refunds directly deposited into their bank accounts to receive refunds more quickly. Avoid the use of “superfast” or “advance” refund services; these are short-term loans that charge interest rates between 60 and 600 percent.
Who is part of the coalition for the C.A.S.H. campaign and how can I be involved?
The coalition consists of people from across Eastern Idaho. There are concerned community members, representatives from the various financial and lending institutions, business leaders, non-profit representatives, and others.
To reach more people across Eastern Idaho and create greater awareness of the EITC, we need your help. Volunteer members of the coalition meet monthly from November through April. To learn more about the coalition and the C.A.S.H. campaign and how you can become involved, please contact Delverne Seaman, the Earned Income Tax Credit Coordinator with Partners for Prosperity, at 785-0059 or 251-5076 or by email at delvernes@p4peid.org
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