The 411 on the Earned Income Tax Credit (EITC)Friday, February 05, 2021
Note: This post shares information relevant to tax filers. Consult your tax advisor for information regarding your individual situation.
Have you heard of the Earned Income Tax Credit? Also known as the EITC or EIC, this federal tax credit helps eligible individuals and families with a tax break. Due to the economic impacts of the COVID-19 pandemic, more Americans may be eligible for the EITC this year.
If you received a letter from the IRS about the EITC, there’s a good chance that you qualify. Those who qualify for the EITC can use the credit to reduce the taxes they owe and possibly increase their tax refund. To claim the EITC, you need to meet certain qualifications and file a tax return, even if you have no other filing requirement or don’t owe any tax.
Eligibility for the EITC
To receive the EITC, you must have income from at least one of the following:
- Work for your employer or someone else,
- Work for yourself,
- A business or farm you own or operate, or
- Some disability plans
The EITC is for workers whose income does not exceed the following limits in 2020:
- $50,954 ($56,844 married filing jointly) with three or more qualifying children
- $47,7440 ($53,330 married filing jointly) with two qualifying children
- $41,756 ($47,646 married filing jointly) with one qualifying child
- $15,820 ($21,710 married filing jointly) with no qualifying children
** Investment income must be $3,650 or less
EITC eligibility is also dependent on several factors, including income and family size. If you don’t have a qualifying child and earned under $15,820 ($21,710 married filing jointly), find out if you qualify for a smaller credit, worth as much as $538.
How to Claim the EITC
To claim the EITC, you must file Form 1040, US Individual Income Tax Return, or Form 1040 SR, U.S. Tax Return for Seniors, with your tax returns. If you have a qualifying child, you must also file the Schedule EIC (Form 1040 or 1040-SR), Earned Income Credit to give the IRS information about them.
Receiving the EITC
The EITC is issued via the taxpayer’s tax refund. The IRS issues more than 9 out of 10 refunds in less than 21 days from filing. However, it’s possible your tax return may require additional review and take longer. You can check your refund status online using the IRS’ Where’s My Refund tool at www.irs.gov/refunds.
For more information about the EITC, visit the IRS’ website at www.irs.gov/eitc.