Earned Income Credit (EIC)
Candlefocus EditorWhen filing their taxes, qualifying taxpayers can claim the Earned Income Credit to reduce their federal tax liability, potentially even resulting in a refund from the IRS. To qualify for EIC, taxpayers must earn income from wages or self-employment and meet other qualifying requirements. The amount of the Earned Income Credit varies based on the taxpayer’s filing status, income and the number of children they claim.
The Earned Income Credit is refundable, meaning that the taxpayer receives the benefit even if the credit amount is more than the amount of taxes they owe. When the Earned Income Credit exceeds the taxpayer’s federal tax liability, the taxpayer receives the remainder of the credit as a refund.
In addition to providing financial assistance, the Earned Income Credit serves as an incentive for taxpayers to remain in the workforce. Taxpayers who are eligible for the Earned Income Credit will receive the most benefit if they remain employed, as the credit reduces in value as the taxpayer’s income increases.
It is important to note that claiming the Earned Income Credit may affect a taxpayers eligibility for certain federal benefits, such as Supplemental Nutrition Assistance Program (SNAP) benefits, Temporary Assistance for Needy Families (TANF) and Medicaid benefits. Taxpayers should consult with the IRS or a tax professional to determine whether or not filing for the Earned Income Credit will affect their eligibility for other programs.
Overall, the Earned Income Credit is an important tool for providing financial assistance and economic stimulation to low- and moderate-income workers. Taxpayers should consult with a tax professional or the IRS to determine their eligibility for the Earned Income Credit and to discuss any potential impacts it may have on their eligibility for other programs.