Don't Forget Earned Income Tax Credit

With the 2012 tax season now underway, Parsippany-based urges  taxpayers to find out if they qualify for the Earned Income Tax Credit. This credit provides eligible low- to moderate-income individuals and families with up to a $5,751 refundable credit on their federal taxes. The maximum 2011 credit, based on income earned from wages, tips, salary and self-employment, represents a slight increase over the $5,666 maximum credit offered for the 2010 tax year.

For the 2011 tax year, the maximum credit amounts are as follows:

• $5,751 with three or more qualifying children
• $5,112 with two qualifying children
• $3,094 with one qualifying child
• $464 with no qualifying children

The EITC is a tax benefit available to millions of taxpayers, but it does have a variety of different eligibility requirements. Because of this, the credit is often overlooked. But taxpayers who may qualify would be well-served to spend the time learning about this important benefit, said Mark Steber, Jackson Hewitt's chief tax officer.

"The Earned Income Tax Credit can provide a tremendous tax break for millions of individuals and families, particularly in today's economy," Steber said. "It's also a complex credit, so consult a knowledgeable tax preparer to see if you qualify."

To claim the credit, taxpayers must meet certain income thresholds. Eligible taxpayers must have total earned income and adjusted gross income less than the following amounts:

• $43,998 ($49,078 married filing jointly) with three or more qualifying children
• $40,964 ($46,044 married filing jointly) with two qualifying children
• $36,052 ($41,132 married filing jointly) with one qualifying child
• $13,660 ($18,740 married filing jointly) with no qualifying children

Steber also cites several additional noteworthy eligibility requirements:

• A qualifying dependent must be under the age of 19 (or under 24 if a full-time student), have the same place of residence as the taxpayer (for at least half of the tax year) and be related to the taxpayer as a child, stepchild, foster child or descendant of these;

• Grandparents, aunts, uncles and older siblings may claim a child as their qualifying child, provided they shared a residence with the child for more than six months of the tax year and the child's parents are unable to claim the child. The same child cannot be claimed by more than one taxpayer for EITC purposes;

• A taxpayer with no qualifying child may claim the credit if he or she is between 25 years and 64 years old at the end of the tax year, has been a resident of the U.S. for more than half of the tax year and is not a dependent of another taxpayer; and,

• For members of the military, there is an option of treating combat pay (which is non-taxable) as income when calculating the EITC – potentially increasing a tax refund.