The IRS offers a variety of credits and deductions designed to ease people's tax burdens. Out of all of them, the Earned Income Tax Credit, or EITC, many times proves to be the most lucrative. You can determine if you can use the EITC on your tax returns this year by learning the key facts regarding this credit and for what purpose the IRS makes it available.
The Earned Income Tax Credit is a tax benefit that is designed to ease the tax burden of low to moderate income earners. It can be utilized by people who meet specific tax filing criteria as well as people whose incomes are so low that they are not required to file returns.
In addition to being geared toward people with low to moderate incomes, the EITC can be utilized by people with children or who support certain groups of dependents. The credit not only eases eligible taxpayers' IRS burden; it can also provide them with a substantial refund each year they are eligible to claim it on their returns.
As noted, the EITC is designed to ease the burden of low to moderate income earners. However, it can also be utilized by:
Despite this tax credit being available to a wide array of taxpayers, many people who are eligible for it fail to utilize it when they file taxes. You can verify your own eligibility by reviewing the criteria online at IRS.gov.
Because the EITC can merit substantial tax refunds for eligible taxpayers, it increasingly is being misused by people who aim to take advantage of the IRS. People can misuse the EITC by fraudulently claiming dependents on their returns. For example, a person might claim his or her nieces and nephews as dependents when in fact they have already been claimed as dependents on their parents' returns.
Alternatively, identity thieves increasingly are using other people's Social Security numbers to file returns and claim the EITC for themselves. The incidences of identity theft are on the rise during tax time, prompting the IRS to implement new security measures.
People who claim the EITC now can expect the processing of their returns to be delayed. This delay allows the IRS to verify the filers' personal information and ensure that the EITC tax refunds are going to the rightful taxpayers. The delay can prolong the processing of a return by several weeks.
The IRS can also put a hold on a person's tax refund if it suspects that the person's identity has been stolen and a return has been wrongfully filed in that individual's name.
People with low to moderate incomes often cannot afford to pay out large sums of money in taxes every year. To ease their burdens, the IRS offers the Earned Income Tax Credit that helps lower what they owe and could result in them being entitled to a refund.
However, people entitled to this tax credit sometimes overlook their right to use it on their returns. In other cases, identity thieves use it to claim refunds that they are not owed. You can rightfully claim it on your returns this year by discovering for what purpose it exists and to what groups of taxpayers it is geared.