Making Earned Income Tax Credit work for you

Tax season is upon us and understanding how income tax credits work can be confusing.  Let’s cover some of the basic credits here.

Earned Income Tax Credit

For the last 40 years, Earned Income Tax Credit (EITC) made life better for millions of workers. This credit helps low to moderate-income workers and families get a tax break. It could be as much as $6,728 from the Internal Revenue Service (IRS) for some workers.  If you qualify, you can use the credit to reduce the taxes you owe – and maybe increase your refund. You may have extra money waiting for you, if you qualify and claim the credit.

The amount of your credit may change if you have children, dependents, are disabled or meet other criteria. Military and clergy should review the IRS’ Special EITC Rules because using this credit may affect other government benefits.

If you claim this credit, your refund may be delayed. However, The fastest way for you to get your tax refund that will include your Child Tax Credit is by filing electronically and choosing direct deposit.

EITC Table

Use this table organized to find the maximum amounts for 2021:

• Adjusted gross income (AGI)

Investment Income

You can make an investment income limit of $10,000 or less in a calendar year.

Maximum Credit Amounts

The maximum amount of credit you can claim

• No qualifying children: $1,502
• 1 qualifying child: $3,618
• 2 qualifying children: $5,980
• 3 or more qualifying children: $6,728

* Taxpayers claiming the EITC who file Married Filing Separately must meet the eligibility requirements under the special rule in the American Rescue Plan Act (ARPA) of 2021.

Advance Child Tax Credit Payments

If you received advance payments of the Child Tax Credit (CTC), you need to compare the total you received with the amount you’re eligible to claim.  The fastest way for you to get your tax refund that will include your Child Tax Credit is by filing electronically and choosing direct deposit.

If you received less than the amount that you’re eligible for, you can claim a credit for the remaining amount of Child Tax Credit on your 2021 tax return. If you received more than the amount that you’re eligible for, you may need to reconcile your excess payment when you file.

In January 2022, the IRS should have sent you Letter 6419 to provide the total amount of advance Child Tax Credit payments that you received in 2021. You need to keep this and any other IRS letters you received about advance CTC payments you received with your tax records and refer to them when you file.

Free Tax Help

The IRS’s Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) programs offer free basic tax return preparation to qualified individuals.

VITA offers free tax help to:

• People who generally make $58,000 or less
• Persons with disabilities; and
• Limited English-speaking taxpayers who need assistance in preparing their own tax returns.

TCE offers free tax help, particularly for those who are 60 years of age and older, specializing in questions about pensions and retirement-related issues unique to seniors.

While the IRS manages the VITA and TCE programs, the VITA/TCE sites are managed by IRS partners and staffed by their volunteers who want to make a difference in their communities. All VITA/TCE volunteers who prepare returns must take and pass tax law training that meets or exceeds IRS standards. The IRS-certified volunteers who provide tax counseling are often retired individuals associated with non-profit organizations that receive grants from the IRS.