Since 1975, the Earned Income Tax Credit has been providing American families with a federal subsidy designed to alleviate the burden of taxation and to encourage taxpayers to remain employed throughout the year. This benefit has been expanded over the last few decades as a way to provide some level of economic relief for low-income and middle class workers. This credit is interchangeably referred to as EIC or EITC.
In essence, the EITC allows qualified taxpayers to get back a fixed percentage of their annual income. Families with more than one child stand to get higher EITC amounts. Low-income taxpayers who do not have children or dependents may also qualify for the EITC, although the amount will be considerably lower. The EITC is paid through the refund indicated on an annual tax return.
The EITC is not determined by federal poverty guidelines. Instead, it's calculated by income levels and by the size of the taxpayer's family. The minimum age is 25 and the maximum age is 65. All income earners and dependents must have valid Social Security numbers. The EITC can be taken by taxpayers filing jointly or individually. The choice of filing should be left to accountants and tax preparation professionals.
As an example, let's say a married couple with three children produces an annual household income that is less than $53,000. the maximum EITC amount this family could receive would be $6,629. Individual workers who earn less than $14,880 per year would receive no more than $506. It is important to note that the EITC is a benefit and not a deduction.
Self-employed professionals and income earners who do not have a 9 to 5 job may still qualify to receive the EITC. To this effect, construction workers who are independent contractors and are paid by means of 1099 forms may still be eligible.
Investment income does not automatically preclude taxpayers from getting the EITC. An office worker, for example, may receive stock options from her employer as a performance bonus. Even if she exercises those options, she may still be eligible as long as her profit was not higher than $3,400 by the time she files her tax return.
Receiving child support, Social Security or early retirement income could render taxpayers ineligible to take the EITC. The same goes for unemployment benefits since the goal of this tax credit is to reward workers. Imprisoned workers do not qualify for the EITC.
In the end, the EITC is a benefit that low-income and middle class taxpayers should explore, particularly if they have children. In terms of determining eligibility and the EITC amount that can be taken, this credit can be as difficult to calculate as itemized deductions or depreciation. For this reason, taxpayers should let a tax preparation professional handle the preparation of their annual return.
With a wide variety of software and forms available online, it seems easier than ever to prepare and file your own tax returns. However, this process can quickly get complicated, which why you may want to put your taxes in the hands of professionals. Here are five benefits of having your taxes professionally prepared and filed:
The cost of having your taxes professionally prepared is often offset by returns you didn't even know you were entitled to. Even just the time it might take you to research available deductions and find the right forms to claim those deductions may cost you more in time and effort than it would cost you to simply have Alpha Tax Services handle them.
The companies that make tax software do a great job of marketing their tools as fast and easy to use. However, most people who have spent time trying to file their taxes in this way know that the experience often takes much longer than expected. If you are looking for a truly fast and simple experience, there's no match for a knowledgeable tax professional.
A tax professional can not only help you with this year's taxes, but they can also help you plan and prepare for your future. You may have done or not done something this year that could have saved you significantly if you had just done it a bit differently. In addition, a tax professional can help you figure out how to get the best tax advantages for any future plans you may have.
Something as simple as entering a number on the wrong line or even mixing up one or two numbers can cause you to believe you owe far less than you actually do or lead to significant delays in getting your return. Hiring a professional significantly minimizes your risks of sending in a return that contains costly mistakes or errors.
If you are audited and the IRS finds any errors in your returns, you could face serious financial and legal consequences. Although hiring a professional to prepare your taxes doesn't automatically clear you from all liability, it does add a significant level of protection.
Tax time is generally a dreaded event for almost everyone. However, it doesn't have to be. Turning your taxes over to a professional can not only save you time and potentially a significant amount of money, it can also save you a great deal of stress. Rather than spending your free time laboring over a complex labyrinth of codes and forms, you could spend it doing something you genuinely enjoy!