IRS urges lower income people to be aware of Earned Income Tax Credit

The Internal Revenue Service and community partners recently kicked off Earned Income Tax Credit (EITC) Awareness Day to promote this critical tax credit provided to eligible lower income individuals and families.

EITC is a refundable tax credit provided to many working Americans, and is the government’s largest tax benefit program for working families and individuals.

The 2009 Recovery Act expanded the credit for 2010 so larger families will qualify for a larger credit this year.

Last year, more than 1.65 million Southern California taxpayers claimed $3.5 billion from EITC, including $1.7 billion from LA County alone. Nationally, some 24 million claimed approximately $50 billion in EITC funds.

“As part of the economic recovery efforts, there have been important changes to expand EITC to benefit taxpayers,” said IRS Commissioner Doug Shulman. “Today, more than ever, hard-working individuals and families can use a little extra help. EITC can make the lives of working people a little easier.”

For tax years 2009 and 2010, the Recovery Act created a new category for families with three or more children. The maximum credit is $5,657 for a family that size. Taxpayers with incomes of $48,279 or less may be eligible to claim the credit, depending on their filing status and family size. The average credit received is more than $2,000.

Community coalitions and IRS partners across the Southland will mark EITC Awareness Day with a series of local events promoting the federal tax credit for low-wage taxpayers. These organizations also operate free tax preparation sites for low-income individuals, seniors and other eligible taxpayers throughout California.

EITC-eligible taxpayers can also seek assistance at IRS offices from Bakersfield to San Diego. Several of them will be open on Saturday, Feb. 6 and/or Feb. 20 from 9 a.m. to 2 p.m. to help taxpayers with EITC. There is also an EITC Assistant available on IRS.gov which can help taxpayers and tax preparers determine eligibility.

About one in four eligible taxpayers fails to claim EITC each year. Eligibility requirements include earned income and family size, among other tests. Those missing out include people with earned income but no filing requirement, non-English speakers, non-traditional families, childless workers, rural residents and people with disabilities.

The maximum amount of investment income to be eligible is $3,100 for tax year 2009. For families, there also are certain requirements for child residency and relationship tests that must be met. Also, unemployment benefits are considered in AGI calculations but are not considered earned income.

More than 65 percent of EITC returns are prepared by a third party. The IRS urges taxpayers to choose a reputable tax preparer to avoid problems that come with an inaccurate tax return. The agency also urges tax preparers to follow due diligence requirements when preparing an EITC tax return. More information is available at www.irs.gov/eitc.