Tax Attic

Jerry Coon
Jerry Coon

The Earned Income Tax Credit (EITC) is one of the largest refundable credit programs administered by the Internal Revenue Service (IRS). In 2011, 27 million taxpayers claimed 62 billion dollars of EITC via their income tax returns equating to an average of approximately $2,200 per claim. The IRS estimates that four out of five taxpayers qualifying for the credit actually claim the credit. Working that out mathematically means the IRS believes that in 2011, there were over six million potential taxpayers who may have qualified for the EITC that did not file and claim the credit. In 2012, as the economy has continued to languish, this figure may grow as more taxpayers will qualify because of a loss of income; a change in marital status; or a change in parental status. “A large part of the nation sees major changes every year with their tax situation,” said IRS Acting Commissioner Steven T. Miller. “This year, millions of workers could qualify for EITC for the first time, and the IRS urges them not to overlook this valuable credit.” Taxpayers must meet a set of rules that apply to all potential claimants so let’s review those qualifications that all taxpayers must meet in order to claim the EITC. First, the claiming taxpayer must have earned income. Second, the greater of the claiming taxpayer’s earned income or adjusted gross income must be less than $13,980 for singles or $19,190 for joint filers with no qualifying children; less than $36,920 for singles or $42,130 for joint filers with one qualifying child; less than $41,952 for singles or $47,162 for joint filers with two qualifying children; or less than $45,060 for singles or $50,270 for joint filers three or more qualifying children. Third, the filing status of the claiming taxpayer cannot be married filing separate. Fourth, the claiming taxpayer must have investment income of no more than $3,200. Fifth, the claiming taxpayer or taxpayers must have valid Social Security Numbers as well as each qualifying child except for a child who was born and died during 2012. Sixth, the claiming taxpayer cannot file a Form 2555 that claims a deduction for foreign income. Seventh, the claiming taxpayer must be a U.S. citizen or resident alien for all of 2012. Nonresident aliens may claim the credit if filing a joint return with a U.S. citizen or resident alien. After meeting the above rules, there are separate rules that apply to claiming taxpayers with or without qualifying children. Those without a qualifying child first must be at least 65 years old but under age 65. If filing a joint return, only one spouse needs to meet the age test. Second, the taxpayer cannot be the dependent or the qualifying child of another person. Finally, the taxpayer must have lived in the United States more than half of the year. Those with qualifying children have slightly different rules. The qualifying child can be used by only one taxpayer to claim the EITC. It’s no fair doubling up. Second, the taxpayer cannot be the qualifying child of another taxpayer. Third, the qualifying child must meet certain relationship, age, residency, and joint return rules.

By meeting these rules, qualifying taxpayers with no children can receive up to $475 maximum credit; qualifying taxpayers with one child could receive up to $3,169 of credit; qualifying taxpayers with two children could receive up to $5,236 of credit; and qualifying taxpayers with three or more children could receive up to $5,891 of credit. Remember that this credit is refundable and can be received in addition to other credits such as the child tax credit, the tuition tax credit, and the child and dependent care credit. The IRS does not expect taxpayers to know the intricate rules that go with the EITC. However, they do expect tax professionals to know and follow these rules. To that end, due diligence requirements have been instituted for all taxpayers to follow but especially for tax professionals. Tax firms such as Action Tax Service fill out, sign, and keep the several required due diligence worksheets. $5,891 of credit is nice to receive but it has to be legitimate. This is Jerry Coon signing off.


Jerry Coon is an Enrolled Agent

and Registered Tax Return Preparer.

He owns Action Tax Service on

Northland Dr in Rockford.

Contact Jerry through his website:


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