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[E38]Earned Income Credit Schedule

by William Blake, Wil

Taxpayers are always very interested in the various tax credits that they can use to reduce their overall tax payments. The Earned Income Credit, commonly referred to as the EIC, is a tax credit which was established in an effort to help people who earn a low income to live as well as possible in their financial situation.
The earned income credit began in 1975. The idea was that the poor were just getting poorer with the taxes they were paying on top of a low income job. The credit gives back to taxpayers a good portion of the money that they paid in taxes throughout the year. In that way, families could keep more of what they earned.
As time has passed, the amount that the earned income credit returns to individuals has gone up. Supporters of the EIC assert that the earned income credit does more for low income workers than simply increasing the minimum wage would. This is because people who are awarded the EIC use the money they get back to make purchases that boost their local economy.
There are three types of EIC eligible incomes. The first is money that is earned at a job. This money would include any wages earned by means of tips. If you are given a bonus by your employer, it can also be counted towards the earned income credit.
Self-employed earnings are also eligible for the earned income credit. If you own your own business but the money you earn with it is not enough to sufficiently care for your family, you may be able to receive the EIC. Any and everything your business earns can be counted.
Lastly, money made by someone under your care is considered. Teenagers have weekend and/or summer jobs. The money may not be enough for them to file a return of their own, but it is added to what their parents earn. Together, the income determines the amount of the earned income tax credit you qualify to receive.
The IRS also counts any income from investments as income earned. If you have money made from investments or drew unemployment for a time during the year, this will affect your chances of receiving the earned income credit. Investment money earned which is over $2,800 can disqualify a taxpayer from the earned income credit.
Sadly, many tax filers are not even aware that they qualify for the earned income credit. Many people think they don't qualify or just are not aware of the EIC. Some people do not earn enough to have to file their taxes, but still qualify for the EIC. Be sure to check into the EIC so that you don't miss out on this opportunity.

No paperwork.

This is one of the main benefits for e-filing. When you e-file, there is no need to work with pieces and pieces of forms. These forms usually arrive in the mail. But because they are delivered by mail, they may arrive late, or they may get lost. This will hinder the filing process and may even cause you to file late. When you e-file, you avoid all those problems, hence saving yourself lots of time.

Minimal error.

Another great benefit for e-filing is that there is very little room for error. We shall look at calculating earned income credit (EIC) later as an example. But for now, it's good enough to be reminded that humans introduce errors when filing taxes.

When you use an online system to e-file, the system will have built in handling that will prevent errors from being introduced accidentally. For example, if there are some required fields that are missing, the system will prompt you immediately and will not allow the submission to go through.

Greater convenience.

Compared to traditional paper filing, it is much more convenient to e-file. You can e-file any time you like - when you wake up or in the middle of the night. You can even save the draft, and continue the e-filing process at a later date if you are missing some numbers. If you are preparing a federal tax return that is not very complicated at all you can usually do it on your own, either using the traditional pencil and pen method, or filing an online tax return.

Calculating earned credit income (EIC).

When filing for tax, you may be unaware of some tax policies. This is where the system can help. For example, EIC is for people who are working but are earning low wages. It reduces the amount of tax that an individual owes. Currently, this amount stands at $35,458, but this may change. The amount is also dependent on various conditions. For instance, if you do not have any children, the ceiling comes down to $11,750.

The problem with such policies is that they may change. And when you paper file, you have to find out what those changes are, and make manual calculations before submission. This, again, may result in errors. If you visit the IRS website, you will find that there are penalties for submitting erroneous information, even though you are not aware of it. For instance, if the mistake was due to recklessness, you could be denied EIC for up to 2 years. Therefore, it is always better to e-file.

When you e-file, the system automatically inform you of the policies, and even calculate the numbers automatically for you. In other words, the system will let you know whether you qualify for EIC or not, based on the numbers that you have provided. That way, you never have to worry about errors and you can find out whether you qualify for a tax credit or not.

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Both William Blake & Matthew Snelling are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.

William Blake has sinced written about articles on various topics from Credit Cards, Debt Reductions and Bankruptcy Law. Are you tired of struggling to keep up with your credit card debt? Get some simple on the Debtopedia website. Visit. William Blake's top article generates over 49500 views. to your Favourites.

Matthew Snelling has sinced written about articles on various topics from Finances, tax. For more information on and