Earned Income Tax Credit (EITC) is a mechanism that allows low and moderate income workers to reduce their tax liability. As long as your income is below a certain level, earned income tax credit can provide a significant reduction in how much you need to pay in taxes. Another important condition is that you have to have worked in the year for which you’re claiming the credit in order to qualify for earned income tax credit.
If you have relatively low to moderate income and you meet other necessary conditions, you may be eligible for federal earned income tax credit. This refundable tax credit can substantially reduce or tax bill or result in a generous refund. The goal of this mechanism is to provide a “work bonus plan” by allowing low to moderate income workers and families to pay a reduced amount of taxes. In other words, it is intended to reduce property and create financial incentive to work. Although you do not need to have children in order to claim the credit, the more children you have, the higher the credit amount will be.
Even if you do not owe any taxes or otherwise would not be required to file one, you must file a tax return in order to become eligible for earned income tax credit.
The amount of EITC you can receive depends on several critical factors, such as your earned income, filing status and number of qualifying children you have. According to the Internal Revenue Service (IRS), a qualifying child is your biological child, stepchild, foster child, sibling, step-sibling, half-sibling or descendent of any of these who meets the necessary requirements. For the tax year 2022, meaning the taxes you file in 2023, the maximum credit amounts are:
As a taxpayer, it can be challenging to stay updated on your entitlements due to the extensive vocabulary and documentation involved. Nonetheless, being aware of your rights is crucial in minimizing your tax liability and ensuring you are paying the right amount of taxes for your specific circumstances. If you need help with earned income tax credit, or you are looking for general support with your taxes this season, reach out to an experienced tax attorney today. Our specialized lawyers at Attorney At Law are here to help.