Ramsey County

Making $ense of Dollars and Cents

January 19, 2009

A Valuable Tax Credit

          People who work but don’t earn a lot of money may be eligible for a tax credit designed specifically for them.  The earned income credit (EITC) is a tax credit for certain people who work and have low wages.  

          The EITC is the federal government’s largest program benefiting lower earning workers.  With the past year’s economic turmoil, individuals and families who have never before qualified for the credit may now qualify for the first time because of unemployment or other changes in their financial status during the past year.
          A tax credit usually means more money in your pocket as it reduces the amount of tax you owe.  Depending on your situation, the EITC net you a refund.  

          The IRS estimates that 20 to 25 percent of eligible taxpayers fail to claim the credit which could put as much as $4,824 into the pockets of a family with two children, or as much as $2,917 to a family with one child, or up to $438 for a worker with no children.

          Earned income includes all the taxable income and wages you get from working. There are two ways to get earned income: You work for someone who pays you, or you work in a business you own.

Taxable earned income includes: wages, salaries, and tips; union strike benefits; long-term disability benefits received prior to minimum retirement age and earnings from self-employment.

          The extra dollars eligible taxpayers can get through EITC can make their lives a little easier but you must file a tax return even if you aren’t required to file, and claim the credit to receive it.”     
          Taxpayers with the earnings of or below $38,646 ($41,646 if married filing jointly) for families with two or more children; $33,995 ($36,995 married filing jointly) for families with one child or $12,880 ($15,880 married filing jointly) if there are no children should check to see if they qualify.
          After determining that you might qualify for the EITC, you need to know how to figure the amount of the credit. You have two choices of how to figure the credit.  You can have the IRS figure the credit for you. If you would like the IRS to do this, you will need to refer to the IRS Publication #596.  Or you can figure the credit yourself. To do this you must use the Earned Income Credit Worksheet (EIC Worksheet) in the instruction booklet for Form 1040, Form 1040A, or Form 1040EZ, and the Earned Income Credit (EIC) Table in the instruction booklet.  The IRS also has an online form available on their website at:http://www.irs.gov.

          Tax credits are important any year, but 2008 might be the year for a record number of EITC applications.

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524 4th Ave NE #5, 2nd Floor Ramsey County Courthouse
Devils Lake  ND  58301
701-662-7027
email - NDSU.Ramsey.Extension@ndsu.edu