The United States federal earned income tax credit or earned income credit (EITC or EIC) is a refundable tax credit for low- and medium-income individuals and couples, primarily for those who have qualifying children. When the credit exceeds the amount of taxes owed, it results in a tax refund to those who claim the credit. For a person or couple to claim one or more persons as their qualifying child(ren), the relationship, age, and shared residency requirements must be met, as well as some other requirements. U.S. tax forms 1040EZ, 1040A, or 1040 can be used to claim EIC without qualifying children. To claim the credit with qualifying children, 1040A or 1040 must be used along with Schedule EIC attached.
EIC phases in slowly, has a medium-length plateau, and then phases out more slowly than it phased in. And since the credit phases out at 21% (more than one qualifying child) or 16% (one qualifying child), it is always preferable to have one more dollar of actual salary or wages (although technically, since the EIC table moves by fifty dollar increments, it's always preferable to have an extra fifty-dollar increment of salary or wages).
For tax year 2012, the maximum EIC for a single person or couple filing without qualifying children is $475. The maximum EIC with one qualifying child is $3,169, with two children is $5,236, and with three or more qualifying children is $5,891. These amounts are indexed annually for inflation.
The earned income tax credit has been part of political debates in the United States regarding whether raising the minimum wage or increasing EIC will better address shortages of good-paying jobs, as seems to be frequently the case for modern economies.
Read more about Earned Income Tax Credit: Overview, Earned Income, Qualifying Children, Other Requirements, Disallowances For Reckless or Fraudulent Claims, Example(s) For 2012 From IRS Pub. 596, Impact, Cost, Uncollected Tax Credits, Storefront Tax Prep, “RACs,” Prep and Account Fees, Third-party Debt Collection, See Also
Famous quotes containing the words earned, income, tax and/or credit:
“Male God: You’ve earned enough credits to get you into heaven.
Steve: Oh, thank God.
Male and Female Gods: You’re welcome.”
—Blake Edwards (b. 1922)
“A sociosphere of contact, control, persuasion and dissuasion, of exhibitions of inhibitions in massive or homeopathic doses...: this is obscenity. All structures turned inside out and exhibited, all operations rendered visible. In America this goes all the way from the bewildering network of aerial telephone and electric wires ... to the concrete multiplication of all the bodily functions in the home, the litany of ingredients on the tiniest can of food, the exhibition of income or IQ.”
—Jean Baudrillard (b. 1929)
“If you tax too high, the revenue will yield nothing.”
—Ralph Waldo Emerson (1803–1882)
“Japanese mothers credit “effort” as the key determinant of a child’s achievement in school, while American mothers name “ability” as the more important factor.”
—Perry Garfinkel (20th century)