The Earned Income Credit
A special tax credit, known as the earned income credit or EIC,
is available to lower-income taxpayers who have at least some earnings
from personal services during the year.
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Warning The EIC is subject to intense IRS scrutiny.
It is identified as a major contributor to the "tax gap" -- the amount
of taxes that should be collected and the amount that actually is
collected. Return preparers are subject to special due diligence
requirements if they prepare a return with an EIC. They also face
stiffer penalties for preparing false returns if the EIC is improperly
claimed. Make sure that you complete Worksheet A in the Form
1040 Instructions to determine whether or not you qualify for the
credit. If you are eligible for the EIC and have the proof
to back that up, then, by all means, claim the credit. If you aren't
eligible or you can't prove your eligibility, claiming the credit
could result in very unpleasant consequences. |
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| Income Phase-Out Range for 2014 Earned Income Credit |
| |
No Qualifying Children |
One Qualifying Child |
Two Qualifying Children |
Three or More Qualifying Children |
| Single, Surviving Spouse, Head of Household |
$8,150 - $14,590 |
$17,850 - $38,511 |
$17,850 - $43,756 |
$17,850 - $46,997 |
| Married Filing Jointly* |
$13,550 - $20,020 |
$23,300 - $43,941 |
$23,300 - $49,186 |
$23,300 - $52,427 |
| *If you are married, you must file a joint return
to claim the EIC. |
However, if you have investment income of $3,350 or more
in 2014, you can not claim the credit. Investment income includes
taxable and nontaxable interest and dividends, capital gains, net
income from rental of personal property, net royalty income, and net
income from passive activities shown on Schedule E, including real
estate rentals (see IRS Publication 596, Earned Income Credit (EIC),
if you are on the borderline and need to know exactly which lines
on Schedule E to look at in determining your passive income).
All
of these ceiling amounts are adjusted for inflation each year.
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Work Smart If your credit is higher than the
tax you'd otherwise owe, you will get the difference as a "refund"
from the IRS. This extra payment from the federal government is intended
to reward lower-income persons for working. |
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If you think the EIC might apply to you, you need to
know:
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