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Earned Income Tax Credit (EITC)
- 1. Earned Income Tax Credit NAACP Economic Department 1816 12th Street NW Washington, DC 20009 (202) 478-6400
- 2. What is EITC? • A refundable tax credit for low-and moderateincome individuals and families • Your income can come from Working for someone else, or Owning or operating a business
- 3. The amount of EITC you can receive depends on Your filing status Income Number of qualifying children
- 4. You may receive anywhere from $2 to $5,891 EITC Range $2 to $475 Number of Qualifying Children 0 $9 to $3,169 1 $10 to $5,236 2 $11 to $5,891 3
- 5. How does EITC benefit me? • Provides short-term safety net EITC reduces your tax liability (if any), so you can Invest in your children’s health and education Improve your financial stability Become less reliant on welfare assistance Be motivated to work more or seek employment
- 6. • Reduces the need and use of refund anticipation loans (RAL) and predatory loans • Strengthen the economy with increased employment rate and spending money • Fast, easy, and FREE to claim EITC
- 7. Am I eligible for EITC? Three requirements: 1. Filing Status 2. Income 3. Qualifying Child
- 8. 1. Filing Status • CANNOT file married filing separately • Have a valid Social Security Number • For a nonresident alien: 1. Married to a U.S. citizen or a resident alien 2. File a joint return
- 9. 2. Income • Must work and receive earned income • Investment income CANNOT exceed $3,200 • CANNOT file for Foreign Earned Income (Form 2555 or 2555-EZ)
- 10. Your earned income can be from • Wages, salaries, tips, and other taxable employee pay • Union strike benefits • Long-term disability benefits received prior to minimum retirement age • Net earnings from self-employment
- 11. Your total earned income must be less than Filing Status $13,980 1 $36,920 2 $41,952 3 $45,060 0 $19,190 1 Married Filing Jointly Income Limit 0 Single Number of Qualifying Children $42,130 2 $47,162 3 $50,270
- 12. 3. Qualifying Child • If you have a qualifying child, he/she must satisfy all the following: 1. 2. 3. 4. Relationship Test Age Test Joint Return Test Residency Test • You CANNOT be a qualifying child of another person
- 13. 1. Relationship Test • Son, daughter, stepchild, foster child, sibling, half-sibling, step-sibling, or • A descent of any of them
- 14. 2. Age Test Younger than you, or your spouse (if filing a joint return), and • Under age 19, or • Under age 24 AND a full-time student, or • Any age if permanently and totally disabled at any time during the year
- 15. 3. Joint Return Test • The child CANNOT file a joint return for 2013
- 16. 4. Residency Test • Live with you, or your spouse (if filing a joint return) for more than 6 months in the United States in 2013
- 17. If you do not have a qualifying child, you must: • Be at least age 25 but under 65 at the end of the tax year • Live in the United States for more than 6 months • Not qualify as a dependent of another person
- 18. How do I claim EITC? • File a federal tax return even if you are not required to file or have any tax liability.
- 19. If you are eligible but do not receive EITC • There may be an error in filing your tax return Incorrect SSN Misspelling of names Claiming a child that does not meet all four tests for Qualifying Child Over- or under-reporting income amount Filing status is single or head of household when married
- 20. What do I need to claim EITC? All documents that are required to file a tax return: • Proof of identification (photo ID, passport) • Social Security Cards • Wage and earning statement(s) from all employers (Form W-2, W-2G, 1099-R, 1099-Misc)
- 21. Most common tax form
- 22. Other documents • Interest and dividend statements from your banks (Form 1099) • Proof of bank routing numbers and account numbers for Direct Deposit (a void check) • A copy of last year’s federal and state returns (if available)
- 23. Who can assist me with EITC? • Volunteer Income Tax Assistance (VITA) – Free tax preparation for taxpayers who make $51,000 or less – Contact 1-800-906-9887 to find the nearest VITA site • Internal Revenue Service – For more specific information – Contact online http://www.irs.gov/eitc • United Way – Existing partnership with VITA – Contact local offices for VITA sites information http://apps.unitedway.org
- 24. How can EITC help me build wealth? • Pay off your credit card(s) • Add to your saving account(s) • Save for your child’s college education
- 25. More wealth-building tips • Buy textbooks for your children • Make home or car repairs • Reduce your monthly bills (eg. Utility, mortgages, school loans) • Pay for doctor and dental visits • Make a down payment for your car/home What else?
Editor's Notes
- Introduce NAACP’s objectivesExplain the importance of promoting EITC through the campaign (see Understanding the Issue)
- Provide a brief background on EITC:The Federal government created EITC in 1975 as a financial assistance program. It then became the largest and most effective anti-poverty tool.
- EITC increases with the number of qualifying children to compensate for the extra care and spending of each additional child.
- -Explain the negative consequences of RAL and predatory loans- RAL are high-cost short term loans made against one’s refund-Since 2013, US banks discontinued RALs-Smaller banks and sketchy lenders still offer RAL products charging high APR (over 100%)-Often times consumers miscalculate how much they will get back in refund, so they may borrow more than they could pay back with their refund-Over 60% of RAL consumers receive EITC – need to encourage people to claim EITC early, so they won’t resort to RALs-For more information on RAL: http://www.creditcards.com/credit-card-news/the-end-of-refund-anticipation-loans-1282.php
- - You, your spouse (if filing a joint return), and qualifying child must each have a valid SSN
- Examples of non-earned income (if asked):-Pay received for work while an inmate in a penal institution-Interest and dividends-Retirement income-Social security-Unemployment benefits,-Alimony-Child support
- Head of Household and Qualifying Widow(er) have the same income limits as a Single filer
- Under age 19 at the end of the tax yearUnder age 24 at the end of the tax year, etc.
- -Address common misconception that EITC only benefits individuals and families with children
- If you were paid in cash, you MUST report the amount in your income- Also consult with your tax preparer and double check the information on your tax return
- You, your spouse (if filing a joint return), and qualifying child must have a SSN card.Remind audience that tax preparers take Due Diligence in verifying taxpayer’s identification Always make sure to have proof of identification and SSN card- SSN card must be VALID FOR WORKPassports can be from any country
- W-2 Form: Wage and Tax Statement is the most common tax form- Show this slide so the audience is familiar with it
- - If you have any of the following, you must also provide documentation.
- IRS created the VITA program to assist low-and medium-income familyAssure the audience that the IRS has a humane faceUnited Way can connect you to local VITA sites and volunteers
- End the presentation with a critical question: Once I receive my refund, how should I use it? To expand from our previous slide (“How does EITC benefit me?”), we want to suggest ways in which you can build wealth from EITC.
- Ask audience to recall ways that EITC can benefit them (from previous slide)Emphasize the fact that wealth-building methods must be customized to each individual’s and family’s needs. What works for one family may not work for another.-Warn the audience not spend the refund wastefully, but consider their own needs first.
- Provide your organization’s contact information Include local VITA’s contact information While you show this slide, take the opportunity for Q&A or closing activities (See “Preparing for Your Event”)