For people with low and moderate income level, the earned income tax credit (EITC/EIC) is one of the most overlooked tax credit. In 2008, 25% of taxpayers that qualify for this tax credit but miss out on it because the rules can be complicated (no surprises there), or simply because they did not know the credit exist or that they qualify for it. This is a refundable tax credit ranging from $457 to a whooping $5,657 (!!).

There’s 3 days until the April 15 tax deadline, if you haven’t filed your taxes yet because you’re a procrastinator like me, then you must check if you qualify for this tax credit.

Earned Income Tax Credit Qualification for 2009 Tax Year

Your earned income or adjusted gross income (AGI: all your taxable income source minus deductions) must be less than:

  • $43,279 ($48,279 married filing jointly) with three or more qualifying children
  • $40,295 ($45,295 married filing jointly) with two qualifying children
  • $35,463 ($40,463 married filing jointly) with one qualifying child
  • $13,440 ($18,440 married filing jointly) with no qualifying children

Minimum tax credit you’ll receive in for Tax Year 2009:

  • $5,657 with three or more qualifying children
  • $5,028 with two qualifying children
  • $3,043 with one qualifying child
  • $457 with no qualifying children

Investment income must be $3,100 or less for the 2009 tax year.

A qualifying child is:

  • Be younger than the taxpayer claiming that child unless the child is disabled and
  • Not have filed a joint return except to claim a refund

The recent stimulus bill (American Recovery and Reinvestment Act) provides a temporarily increase to the earned income tax credit, and expands credit for workers with three or more qualifying children, which applies to the 2009 and 2010 tax year.

If what’s written above doesn’t make sense to you for whatever reason, consider using the Earned Income Tax Credit Assistant, created by the IRS:

If You Qualify, Your State/Local Government May Have EITC Too!

Twenty two states along with the District of Columbia offers earned tax income credit for those who qualify for the federal tax credit, the state/local government tax credit may or may not be refundable.

States with Refundable Earned Income Tax Credit:

  • District of Columbia, Illinois, Indiana, Iowa, Kansas, Louisiana, Maryland, Massachusetts, Michigan
  • Minnesota, Nebraska, New Jersey, New Mexico, New York, North Carolina, Oklahoma, Oregon, Rhode Island (partial), Vermont

States with Nonrefundable Earned Income Tax Credit:

  • Delaware, Maine, Virginia

Get Your Earned Income Tax Credit Throughout the Year

If you qualify for the EITC, you may want to consider receiving the credit as a payment throughout the year for 2010 instead of waiting until you file your 2010 tax return (which may be April 13, 2011 if you’re a procrastinator like me!). To get the EITC throughout the year, complete IRS Form W-5 and give the lower portion of the form to your employer (keep the top portion for your records).   If you need more information on getting your EITC through monthly payments, check out the Advance EITC page from the IRS.

FreeFile or Free Tax Prep Assistance from Volunteers

If you qualify for the earned income tax credit, you definitely qualify for free file from various tax preparation organization or software, such as TurboTax’s Free Federal eFile. TurboTax’s free eFile edition will automatically include the earned income tax credit along with any other tax credit/deductions that you qualify for.

The Volunteer Income Tax Assistance Program offers free tax help for low to moderate income people (generally below $49,000) who can’t prepare their own tax returns.   As it’s almost April 15, you may have limiting options since many places have limiting ability in time schedule. Check with the IRS for the list of VITA sites.  Only 19 states are listed so if you don’t see your state listed, you can call the VITA site locator number at 1-800-906-9887.

Forms and Resources: