Unclaimed cash: IRS has it and you might be able to get it back

Everyone loves the Internal Revenue Service, right?

Most cringe at the mention of the IRS. However, no one cringes at the word "refund."

With the W-2 forms and other statements arriving in the mail, many will be running out to get their refunds. If you owe, the looming April 15 deadline will come sooner than the tulips in your garden.

But, did you know that you may be eligible to receive free money from the U.S. government through the Earned Income Tax Credit?

This credit is often overlooked and without knowledge of the EITC, you could be letting money slip through your fingers.

Between the Government Accountability Office and the IRS, they have estimated between 20 to 25 percent of all households do not claim their credits. That is a staggering $6.5 billion to $12 billion in unclaimed refunds.

"The intention of the Earned Income Tax Credit is to help workers in a certain tax bracket who were in most need of economic help and to give them a boost," said Michael Berardi, president of E Tax Express in Stroudsburg.

Berardi recommended anyone preparing his or her own taxes should either get information from the IRS Web site on the EITC before filing or go to a tax preparer who has knowledge of the credit and can tell you if you qualify.

Beware of filing mistakes that may cost you, too.

"Taxpayers that file their own taxes have a greater chance of missing out on the EITC and getting a lesser amount on their refund because of filing errors or simply because they are unaware of the credit all together," said Berardi.

Common EITC filing mistakes are:

* Claiming a child who does not qualify.
* Married taxpayers filing incorrectly as a single or head of household.
* Incorrect reporting of income.
* Incorrect Social Security numbers.

According to the IRS Web site, earned income is all taxable income you receive from an employer or through your own business.

"A big mistake many make on their tax return is that they claim income that does not qualify as earned income, which puts them over the income limit, therefore losing out on the credit or receiving less than they should," Berardi said.

Earned income includes: tips and commissions, union strike benefits, long-term disability benefits, net earnings from self-employment, non-taxable military combat pay.

Examples of non-qualifying income are: pension, unemployment benefits, alimony, child support, Social Security and interest and dividends

"Many taxpayers may be missing out simply because they do not know they qualify," said Mark Hanson, IRS Media Relations. "As a general rule, the IRS urges all taxpayers who earned less than $49,000 in 2009 to see if they qualify," he said. "Taxpayers who earned less than $49,000 in 2009 may be eligible for up to almost $5,700 as a result of the Earned Income Tax Credit."

Hanson recommended those taxpayers preparing their own return, to consider using e-file software, which can be used for free by going to www.irs.gov/freefile.

"The e-file software will ensure they properly claim all credits and deductions they are entitled," Hanson said.

You may also be eligible to have your taxes prepared for free by the IRS.

"If a taxpayer wants somebody else to prepare and file their return, we encourage them to consider the Volunteer Income Tax Assistance (VITA) program. Taxpayers who earned less than $49,000 in 2009 may be eligible to have IRS-trained volunteers prepare and e-file their returns for free," he said.

Visit www.irs.gov and keyword search "EITC assistant" for help and to see if you might qualify.

For more help contact your local United Way chapter and/or AARP. These two organizations provide extensive assistance throughout the country.

Hanson advised that there have been some changes to the EITC.

New for tax year 2009: The amount of EITC increased for workers with a third qualifying child and the rules changed for determining who is a qualifying child (in the past, two qualifying children applied).

If you think you may have missed out in previous years on the EITC or made a mistake on a return that may have affected the amount received, you may still have an opportunity to cash in.

According to Hanson, if a taxpayer failed to properly claim the credit or has been denied the credit for some reason, he or she may want to file an amended return.

"If a taxpayer did not file a return at all for any or all of the previous three tax years, but was eligible for the EITC, he or she may want to file this year. April 15, 2010, will be the final deadline for 2006 returns and amendments," he said.

Remember, generally you have three years from the original filing date to file an amended return.

"Not all taxpayers are required to file a return; however, if they were eligible for EITC and did not file, they could be forfeiting quite a bit of money," said Hanson. "Each year, 20 to 25 percent of eligible taxpayers fail to properly claim the EITC resulting in lots of money being left on the table."

Tax laws change and if you don't know about it, you could be losing some of your hard earned money to Uncle Sam.

"With the many changes made to the tax law for 2009, everyone filing taxes should seek advice from an accountant or the IRS for more money-saving opportunities," said William Livesey, CPA, of Stroudsburg.

Some of those changes for the EITC include military combat pay.

"Someone who receives military combat pay should be aware that though combat pay is not taxable, it can be included as earned income, but should have it calculated both ways, with and without to see which will give the maximum refund credit," Livesey said.

DO YOU QUALIFY?

Determining if you qualify for the EITC can be tricky. Here are a few basic tips from E Tax Express:

* You must have a valid Social Security number.
* Filing status cannot be married filing separately.
* You must be a U.S. citizen or resident alien all year.
* You cannot be a qualifying child of another person.
* The range of adjusted gross income is if you earn less than $13,440 for a single person no children to $48,279 for married filing jointly with three or more qualifying children. If you fall anywhere in this range you could qualify for the EITC.
* If your investment income is more than $3,100, you cannot claim the EITC.
* You cannot be filing foreign-earned income.