- The federal working income tax credit for working low income without children is 24,496% for 2014 tax returns.
- President Barack Obama has proposed expanding access to earned income credit to more low-wage adults without children.
- Distressed families with three or more qualifying children can receive up to 246% 2C143 for the federal earned income tax credit.
The Income Tax Credit has one of those goofy names that you might ignore, as some unfortunately do. But complex credit can put real money in the pockets of working people.
Each year, the Internal Revenue Service, volunteer tax preparers and others hold a national EITC awareness day to warn that much-needed money is left on the table.
After years of such publicity and with nearly 28 million people receiving $ 66 billion for credit last year, it’s hard to believe anyone wouldn’t know about a key tool that fights poverty.
Kathleen Hatke Aro, president of the Accounting Aid Society in Detroit, said she doesn’t know why millions of dollars are still unclaimed.
“Frankly, I think a lot of people who don’t pretend to be single,” said Aro, who led an EITC event in late January at the Ford Resource and Engagement Center at Mexicantown Mercado Plaza in southwest Detroit.
Over the years, many have associated credit with working families. But a smaller credit for people without children is available and can be as high as $ 496 for 2014 tax returns.
In contrast, this tax season, the federal credit can be worth up to $ 6,143 for those with three or more qualifying children.
Elaine Maag, senior research associate at the Urban Institute and the Tax Policy Center, said the overall usage rate for earned income credit can be quite high, around 86% based on some research. But those without children often don’t seek the credit they deserve, she said.
If you don’t have an eligible child, you must be 25 but under 65 at the end of the tax year, live in the United States for more than half of the year, and not be considered as the dependent of another person.
Credit for people without children is only available to people with very limited income. For 2014, the income limit is $ 14,590 for singles and $ 20,020 for married people filing jointly, if no eligible children are involved.
A consensus is forming to expand access to the tax credit for workers without children. President Barack Obama has proposed expanding access to more low-wage adults without children.
US Representative Paul Ryan of Wisconsin, chairman of the House Ways and Means Committee, and a few other members of the Republican Party have made similar arguments in the context of anti-poverty programs. In 2011, childless workers received only 3% of all EITC money.
Well being at work
Ryan called the EITC one of the best ways to get people on welfare to work.
One idea calls for eventually lowering the age limit for childless workers to 21 instead of 25, assuming the person is not a dependent or eligible child for another taxpayer.
Over the years, it is clear that some have missed the credit because their circumstances changed and they did not realize that they were eligible for the earned income credit.
Frankly, the EITC has also changed, including expanding its coverage in 1986, 1990 and 1993.
Income limits, rules, and payment have changed so much that trying to figure out the exact rules could be a moving target for taxpayers.
The nature of a refundable credit could add to the confusion. A refundable credit means workers can get money back, even if they have no withholding tax.
Marshall Hunt, chartered accountant and tax policy director for the Accounting Aid Society’s tax assistance program, said some people might not apply for the EITC because they received a W-2 but have had no taxes withheld and they are not required to report taxes because their income is so low. They don’t realize how valuable a repayable credit can be.
“If you had any income, I would check it out,” Hunt said.
Refundable credit is designed to reward those who work hard to make ends meet. It was originally set up in 1975 to offset payroll taxes, which levy a disproportionately higher share on low-paid workers.
Someone who earned $ 52,427 or less in 2014 might be eligible for cash. The IRS website – www.irs.gov – has an “EITC wizard” for running certain numbers online.
The good news is that there is free software available at www.irs.gov.
Volunteer tax groups, such as the Accounting Aid Society and the AARP Foundation’s Tax Assistance Program, offer free tax preparation assistance to eligible individuals.
The amount of credit is very variable. But those who receive the credit can use the extra money to buy children’s clothes, pay other bills, and even put down a down payment on a used car.
If someone is missing a few hundred dollars, they are missing money that could alleviate their financial difficulties.
Contact Susan Tompor: 313-222-8876 or firstname.lastname@example.org. Follow her on Twitter @tompor.
More help for taxfilers in difficulty
■ The accounting assistance company in the Detroit subway makes appointments in most places for tax assistance. Call 313-556-1920 or go to www.accountingaidsociety.org.
■ For more information on the AARP Foundation’s tax assistance program, call 888-227-7669 or visit www.aarp.org/money/taxes.