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The IRS has launched an Earned Income Credit awareness campaign since one-third of the eligible population changes each year as their financial, marital, and parental statuses change.

IRS Promotes Broad Application of Earned Income Credit

  • 2/6/2013

IRS Promotes Broad Application of Earned Income Credit

The IRS has launched its Earned Income Credit (EIC) campaign for the 2013 filing season. On January 25, 2013, the IRS observed EIC Awareness Day. The IRS reported that workers, self-employed people, and farmers who earned $50,270 or less in 2012 could receive larger refunds if they qualify for the EIC.

The American Taxpayer Relief Act of 2012 (ATRA) makes permanent a number of temporary enhancements to the EIC, which were scheduled to expire after 2012. The permanent provisions include, among others: an EIC phaseout rule that applies by multiplying the phaseout percentage by a taxpayer’s AGI, rather than modified AGI; and an EIC safeguard that protects it against reduction by any AMT liability. ATRA also extends the temporary $5,000 increase in a joint filer’s phaseout amount and the temporary increase in the EIC for taxpayers with three or more qualifying children from 40 percent to 45 percent, both provisions through 2017.

The IRS explained that its annual EIC awareness campaign is necessary because one-third of the eligible population changes each year as their financial, marital, and parental statuses change.

EIC limits

The EIC varies based on income and family size. The IRS reported that taxpayers who qualify for EIC for tax year 2012 may obtain a credit from:

  • $2 to $475 with no qualifying children
  • $9 to $3,169 with one qualifying child
  • $10 to $5,236 with two qualifying children
  • $11 to $5,891 with three or more qualifying children

The IRS projected on its website that the tax year 2013 maximum EIC would be $6,044 with three or more qualifying children; $5,372 with two qualifying children; $3,250 with one qualifying child; and $487 with no qualifying children.

EIC requirements

The IRS also outlined the basic requirements of the EIC (not an exhaustive list):

  • Taxpayers must have earned income; most other types of income, such as retirement pensions, though usually taxable, do not count as earned income.
  • Taxpayers must have a Social Security number that is valid for employment for self, spouse, and any qualifying children.
  • A taxpayer’s amount of investment income is limited.
  • The filing status used must be single, head of household, married filing jointly, or qualifying widow or widower. A taxpayer who files as married filing separately cannot get the credit. ·
  • Generally, the taxpayer must be either a U.S. citizen or resident alien.
  • The taxpayer cannot be a qualifying child of another person.

For tax year 2012, both earned income and adjusted gross income (AGI) must each be less than:

  • $13,980 ($19,190 married filing jointly) with no qualifying children
  • $36,920 ($42,130 married filing jointly) with one qualifying child
  • $41,952 ($47,162 married filing jointly) with two qualifying children
  • $45,060 ($50,270 married filing jointly) with three or more qualifying children

For taxpayers claiming the EIC based on having one or more qualifying children, each child must meet all four tests: the relationship test, age test, residency test, and the joint return test.

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