We are all anxiously awaiting for our W-2 forms to arrive in the mail so we can get those income taxes filled out. Every one of us tries to find every possible deduction that we can to reduce our tax liability. Millions of people will pay an accountant or a tax preparation service to do this for us because often times many people overlook, or are unaware of the many deductions that are allowed. The earned

income credit is one of those many deductions that can lower the amount of taxes that we may owe the IRS, or increase the amount of money that we will get back on our return.


What exactly is the Earned Income Credit or the EITC? This is a special tax credit for certain people with low wages. When filing for this tax credit you cannot be married and file separately. Furthermore, there are certain income limits that make you eligible to use this deduction. In the past 2 years the American Recovery and Reinvestment Act has provided a temporary increase for the Earned Income Credit. The ARRA has also provided expansion of credit for wage earners with three or more qualifying children. Hopefully these temporary measures will be in effect this tax season too. To find out about qualifying children see Publication 595 under Chapter 2, Rules If You Have a Qualifying Child.

In order to claim the Earned Income Credit on your taxes you must meet certain criteria and have the appropriate documents with you when you go to file. You must have a valid social security number. You must have earned wages from some sort of employment. Sources of earned income comes from salaries, wages, tips, self-employment, union strike benefits, and long term disability benefits received prior to the age requirements. You cannot be married and file separately from your spouse. You must be a U.S. citizen. If you are not, then you must be a resident alien all year, or a nonresident alien married to a U.S. citizen. If you are a resident alien and married, you must file a joint return. If you have been denied in the past for this tax credit and you want to claim it this year, then you must file form 8862. If you where disallowed in earlier years, but have claimed it in recent years and it was allowed, do not file this form. Furthermore, you should not file this form if have been disallowed in the past for fraud for at least ten years. It you were denied simple because of disregard for the tax rules then wait at least two years before filing an 8862 form.

What are the age limits on a qualifying child? The child must be under the age of 19, a full time student under the age of 24 at the end of the year, or permanently disabled regardless of age. They must also be younger than you are your spouse if filing jointly, and they must have resided with you in the United States for more than half of the year.


What relationship with you must the child be in order to qualify you for the Earned Income Tax Credit? A qualifying child can be your son, daughter, stepchild, or an adopted child. Furthermore, an eligible foster child can be claimed. To meet this requirement the child must have been placed by authorized agency, judgment, decree, or court. Any descendant such as your grandchildren qualifies you for this tax credit. Individuals such as your siblings which includes half and step siblings or their descendants are considered qualified under these guidelines.

More information about taxes, earned income credits, and special guidelines can be found at the IRS website.

You can read some of my other tax articles here:

Free Tax - Get Free Services and Help with Your Taxes

Taxes - Childcare Tax Credit

Taxes - Adoption Credit

Claim Tax Credits - Age Limits for Claiming Dependents

Taxes - The Lifetime Learning Credit

Free Tax Filing - This Tax Season Offers More Choices