What is the Earned Income Tax Credit?
Posted by Mords1944 on April 27th, 2020
The Earned Income Tax Credit or EITC, also called EIC, is an important benefit for working people who have low to moderate incomes. The EIC is a refundable credit, enacted as a work incentive in the Tax Reduction Act of 1975. It provides a financial boost to working people and families. It has become one of the main forms of public assistance for low-income working taxpayers. A tax credit means more money in your pocket. It reduces the amount of taxes you owe and can also give you a refund. Eligibility for the EIC is based on the taxpayer's earned income, adjusted gross income, investment income, marital status, and employment status in the United States. The EIC amount is based on the presence and number of qualifying children in the worker's family, as well as adjusted gross income and earned income.
The earned income credit generally equals a specified percentage of earned income up to a maximum dollar amount. Earned income is defined as wages, salaries, tips, and other compensation to employees, but only if Bottom line amounts are included in gross income, plus the amount of net earnings from self-employment by the individual. The maximum amount applied in a given income range and decreases to zero in a specific elimination range. For taxpayers with earned income (or adjusted gross income ("AGI"), if higher) that exceeds the beginning of the elimination range, the maximum amount of EIC is reduced by the elimination rate multiplied by the amount of income earned ( or AIG, if greater) in excess of the beginning of the phasing out range. For taxpayers with earned income (or AGI, if greater) in excess of the end of the phasing out range, credit is not allowed.
An individual is not eligible for the EIC if the total amount of the taxpayer's disqualified income for the taxable year exceeds $ 3,450 (for 2017). This threshold is indexed for inflation. Disqualified income is the sum of interest (taxable and exempt from taxes), dividends, net rental income and royalties (if it is greater than zero), net capital gains and net passive income (if they are greater than zero) that are not self-employment income.
The EIC is a refundable credit, which means that if the amount of the credit exceeds the taxpayer's federal income tax liability, the excess will be paid to the taxpayer as a direct transfer payment.
The EIC generally equals a specific percentage of earned income up to a maximum dollar amount. Earned income is the sum of employee compensation included in gross income (generally, the amount reported in Table 1 of Form W2, Declaration of Wages and Taxes) plus net earnings from self-employment determined with respect to to the deduction of half of the taxes on self-employment. Special rules apply to calculate earned income for EIC purposes. Net earnings from self-employment generally include the gross income derived by an individual from any trade or business conducted by the individual, less deductions attributable to the trade or business that are permitted under the self-employment tax rules , plus the distributive distribution of the individual. share of income or loss from any trade or business of a company in which the individual is a partner.
When to expect EIC refunds in 2018
Due to changes in the law, the IRS cannot issue refunds before February 15, 2018 for returns claiming the EIC. This applies to the entire refund, not just the part associated with the EIC.
The Americans Protection Against Tax Increases Act of 2015 (PATH) made several changes to claim this credit. The PATH Act made the following changes, effective for the 2016 filing season, to help prevent loss of income due to identity theft and refund fraud related to fabricated wages and withholdings:
The IRS cannot issue a credit or refund to a taxpayer before February 15, if the taxpayer claims the Earned Income Tax Credit on his return.
Store Bitcoin and a Earn Passive Income
Miny CC allows you to store your Bitcoin, Litecoin and Ethereum on their platform and pays you 10%-19% in monthly returns based on your stake.