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Earned Income Tax Credit

In an effort to educate and create awareness among the low-income taxpayers, taxpayers with disabilities and taxpayers with children, the Internal Revenue Service (IRS) celebrates the National Earned Income Tax Credit Awareness day on January 31, 2020.

The Earned Income Tax Credit also known as EITC, is a tax credit that increases the taxpayer’s refund or reduces the amount of tax owed. To qualify for the EITC, the taxpayer must have earned income from working for someone or from running or owning a business or farm.  EITC is one of the largest antipoverty programs. It is important to educate and create awareness about the EITC so those who qualify for this credit can claim it and take advantage of its benefits. Some of the taxpayers at risk for overlooking this credit includes grandparents raising a grandchild, workers without children, workers with limited English skills, workers living in rural areas, Native Americans workers, workers with earnings below the filing requirement, and workers who have disabilities or are raising children with disabilities

To claim this credit, the taxpayer must file a federal income tax return even if the taxpayer owes no tax or isn’t required to file a return. The EITC is a complex tax credit. It varies by income, family size and the taxpayer’s filing status. To qualify for the EITC, the taxpayer must meet the adjustable gross income limit or threshold. Taxpayers without qualifying children might qualify for the EITC if the taxpayer meets the income threshold. Children that are claimed as dependents for EITC purposes must meet all qualifying child rules.

The IRS estimates that four out of five eligible taxpayers claim and receive the EITC.  Nationwide, during 2019, 25 million eligible workers and families received about $61 billion in EITC. During 2019, in South Carolina, 453,000 taxpayers claimed the EITC, 10,000 taxpayers less than in the 2018 tax year. The average amount of EITC received during 2019 in SC was $2,618.00. 

The EITC is one of the most audited credits within the IRS. Taxpayers must keep records even if it is not the first time the taxpayer claimed this credit for the same children. During an EITC audit, the IRS will request that the taxpayer provide proof of relationship, residency, income and support for all the qualifying children claimed. The IRS has a 3-year statute of limitation to assess a tax return from the due date or the date the return was filed, whichever is later.  Therefore, taxpayers should keep copies of their records for at least 5 years.

The IRS has created the EITC Assistant tool. This tool can verify if the taxpayer is eligible for EITC, and it can also help estimate the amount of the credit. To use this tool, taxpayers can visit the IRS website at https://www.irs.gov and type “EITC Assistant” in the search engine.

South Carolina Legal Services Low Income Taxpayer Clinic represents taxpayers that are wrongfully denied this credit. Our services are free. To apply for our services, please call 1-888-346-5592 or apply online at www.sclegal.org.

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