Debunking Earned Income Tax Credit Myths
Most people may just want to get their tax return completed and have the stress of it all behind them. However, being too hasty and not exploring your options can surely lead to overpayment or a minuscule return from the government. In particular, the Earned Income Tax Credit (EITC) is often misunderstood and underutilized for how much it can potentially benefit families. Learn more about the Earned Income Tax Credit and how to avoid common myths about it here!
What is the Earned Income Tax Credit?
Put simply, the Earned Income Tax Credit (EITC) is the largest single federal income tax credit that the government makes available to low and moderate-income workers. The EITC is intended to benefit families with children. When calculating the EITC, the amount of credit it totals is based on a fixed percentage of earnings, up to a certain level of income, after which it declines until the credit is no longer available. The EITC also increases based on the number of children.
What is the Earned Income Tax Credit Not?
Many misconceptions persist about the EITC, and these myths can harm those who might otherwise have benefited from them if they don’t take full advantage.
To start, the EITC is not a handout for parents who don’t work or a form of welfare in that way. Rather, a person or a couple must be working and earning income before the tax credit can even become available to them.
Additionally, the EITC is not an automatic payout that gets sent to those who qualify. Instead, those who qualify need to submit their taxes to the government and file a return that shows they meet the specific EITC requirements. This means, even families that don’t owe taxes should file a return so that they can claim their potential refund. Otherwise, it won’t be sent out.
Lastly, the EITC does increase based on how many children a family has, but that does not mean that it is a credit that is only available to families with children. Childless couples whose income falls below the ceiling can still qualify for the EITC. Additionally, you may have another dependent who is not a child, such as a disabled adult under your care, that counts towards your EITC filings. So, even if you are not a parent, that does not necessarily mean the EITC is not for you.
The Earned Income Tax Credit is often misunderstood, and, unfortunately, this leads people to miss out on the credits that are due. The experts at Tobin & Collins can help walk you through your EITC eligibility to see if you qualify. Contact Tobin & Collins to learn more!