Home Finance Reduced Eligibility for Underrated Tax Credit: A Look at the Impact on Americans

Reduced Eligibility for Underrated Tax Credit: A Look at the Impact on Americans

Reduced Eligibility for Underrated Tax Credit: A Look at the Impact on Americans

Fewer Americans will be able to take advantage of a valuable tax credit than in the previous year, which many taxpayers typically miss.

Millions of Americans will either be unable to claim the Earned Income Tax Credit (EITC) or qualify for a much smaller amount as a result of the pandemic enhancements to the EITC’s (EITC) eligibility expiring for the 2022 tax year.

The possibility that so many Americans who are still eligible for the EITC will ignore it this year may increase as a result of the expiration. Because historically 1 in 5 eligible Americans fail to claim the credit, the Internal Revenue Service hosts an EITC Awareness Day every year, which will take place on January 28 this year.

Acting IRS Commissioner Doug O’Donnell stated, “This is an absolutely critical tax credit that aids millions of hard-working people every year.” But each year, a large number of people lose out on the credit because they are unaware of it or fail to recognize their eligibility.

Reduced Eligibility for Underrated Tax Credit: A Look at the Impact on Americans

The American Rescue Act, which did not impose an upper age limit and expanded the EITC to include 18 to 24 year olds, took effect last year. The credit was made fully refundable, assisting numerous workers and working families with low and moderate incomes. More than 17 million people benefited from the credit’s tripled amount for workers without qualifying children.

These modifications are no longer present. As a result, some taxpayers might get a smaller refund than they did the year before.

This year, in contrast to the pandemic expansion of the previous year, you must be between the ages of 25 and 64 to be eligible for the EITC. The maximum EITC for single filers without children is $560. The maximum pandemic-era credit for last year was $1,500.

You must also have a source of income, meet certain requirements for credit eligibility for the current, prior, and subsequent tax years, and have an adjusted gross income that is at or below those levels.

Credit: IRS

Earned income includes wages, salaries, tips, self-employment, and work from a side business or gig, such as temporary work, serving as a delivery or ride-share driver, or operating an online store. Non-taxable combat pay is regarded as income for those in the military.

Unemployment compensation, alimony, child support, social security, pensions, and annuities are not regarded as forms of earned income.

If your income falls within the eligibility range, you might be eligible for the EITC even if you don’t have children.

You might qualify for this credit if your marital status changed, you joined the military, were disabled, lived in a rural area, were a grandparent raising a grandchild, were disabled, or were Native American.

Use the IRS EITC Assistant tool if you’re unsure if you qualify for earned income.

People who have undergone a significant change in their lives within the last year in particular, O’Donnell said, “may qualify for the first time.” The IRS urges people to carefully review this significant credit because it doesn’t want anyone to miss out.

You might be eligible for free tax filing services if you are eligible for the EITC.

At the Volunteer Income Tax Assistance, tax preparation is free for people who make $60,000 or less annually (VITA). For those with moderate to low incomes, disabilities, senior citizens, or language barriers, VITA provides free tax preparation services.

If your income was $73,000 or less, check out the IRS’s free file options for brand-name software that enables you to submit your return electronically.

Last but not least, even if your refund includes other credits unrelated to the EITC, the IRS cannot issue your tax refund before mid-February if it is partially based on the EITC or the Increased Child Tax Credit (ACTC). If there are no problems with the returns, the IRS predicts that the majority of EITC claimants will receive their refunds by February 28.

To avoid delays, taxpayers should file their taxes electronically and receive their refunds via direct deposit.

Ronda is a lawyer with experience in law, insurance, education, and government. She works as a senior personal finance reporter for Billionschannel .


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