CARL WATTS & ASSOCIATES

February 10, 2014

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The Earned Income
Tax Credit
Our previous few newsletters dealt mostly with higher income taxpayers; it is now time to show the same care for low and moderate income taxpayers.

On January 31, the day that marked the IRS kick-off tax season, the IRS, together with partners nation wide, launched the Earned Income Tax Credit Awareness Day outreach campaign “.. to ensure that millions of low-and moderate-income workers get the credit they deserve and get it right.”

It seems that last year alone, over 27 million eligible workers and families received more than $63 billion total in EITC, with an average EITC amount of $2,300
An estimated four out of five eligible workers and families get the credit, but millions miss it annually either because they don’t claim it when filing or don’t file a tax return at all.

So, who can claim the the Earned Income Tax Credit (EITC)?

First of all, you must be a U.S. citizen or resident alien all year, or a nonresident alien married to a U.S. citizen or resident alien and filing a joint return.

At the same time, you must have earned income (such as wages, self-employment and farm income) and must file a tax return, even if you don’t ordinarily have to. If you have to file Form 2555 or Form 2555 EZ (related to foreign earned income), you don’t qualify for the EITC.

Your earned income and adjusted gross income (AGI) for tax year 2013 must each be less than:

  • $46,227 ($51,567 married filing jointly) with three or more qualifying children;
  • $43,038 ($48,378 married filing jointly) with two qualifying children;

  • $37,870 ($43,210 married filing jointly) with one qualifying child;
  • $14,340 ($19,680 married filing jointly) with no qualifying children.

Tax Year 2013 maximum credit amounts are:

  • $6,044 with three or more qualifying children;
  • $5,372 with two qualifying children;
  • $3,250 with one qualifying child;
  • $487 with no qualifying children.


Your investment income must be $3,300 or less for 2013 tax year.

For tax year 2014 all amounts are slightly higher.
Your earned income and adjusted gross income (AGI) must each be less than:

  • $46,997 ($52,427 married filing jointly) with three or more qualifying children;

  • $43,756 ($49,186 married filing jointly) with two qualifying children;

  • $38,511 ($43,941 married filing jointly) with one qualifying child;

  • $14,590 ($20,020 married filing jointly) with no qualifying children.


Tax Year 2014 maximum credit amounts are:

  • $6,143 with three or more qualifying children;
  • $5,460 with two qualifying children;
  • $3,305 with one qualifying child;
  • $496 with no qualifying children.

Your investment income must be $3,350 or less for the 2014 tax year.

Remember that the EITC reduces the amount of tax you owe and may also give you a refund.

You must, of course, have valid Social Security numbers for yourself, your spouse if married, and any qualifying child listed on your tax return.

You may be married or single, with or without children to qualify. If you don’t have children, you must also meet age, residency and dependency rules (you cannot be a dependent on someone else’s tax return).

If you are married, you cannot file separately.

If you are a member of the U.S. Armed Forces serving in a combat zone, special rules apply.

Persons with disabilities or persons having children with disabilities may qualify for the Earned Income Tax Credit as well.

You can figure the credit yourself by using 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, or use the EITC Assistant Tool online. It is available in both English and Spanish. As a matter of fact, there is an EITC Home Page on the IRS website with all the information you may need.

If the IRS denied or reduced your EITC for any year after 1996 for any reason other than a math or clerical error, you must qualify to claim the credit by meeting all the rules described above and you must attach a completed Form 8862, Information to Claim Earned Income Credit After Disallowance to your next tax return to claim the EITC.

It does not seem too complicated to claim this credit (as well as many others), nevertheless, a small investment on a tax professional can always secure that you have no difficulties or issues with your tax return.
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