IRS Gives Free Money to Taxpayers

IRS Gives Free Money to Taxpayers
By: Renee Daggett

I want free money!!  How do I get it?  Back in 1975, Congress approved this Earned Income Credit (EIC) to provide an incentive to working taxpayers.  To qualify, you must meet certain requirements.

To qualify, you must have earned income from employment (W-2), self-employment or another source of income.  You don’t need to have children to qualify, but the more kids you have, the higher the credit.  You can be single, head of household or married filing joint with your spouse to qualify.

If you are married and have at least one child, there are 4 tests that you must meet to qualify:
1. The relationship of the child (son/daughter/adopted child/stepchild/foster child/grandchild/sibling/niece/nephew)
2. The age of the child (younger than you, younger than 19 or younger than 24 and a full-time student, or disabled)
3. Residency (child must live with you in the US for more than ½ the year)
4. Must file a joint return (child cannot file a joint return)

If you are married and have no children, you must meet 3 tests:
1. You and your spouse must have lived in the US more than ½ the year
2. You or your spouse must be between the ages of 25 and 64
3. You or your spouse cannot qualify as a dependent of another person

In order to qualify in 2014, your adjusted gross income (AGI) must be less than:
•$46,997 for single or HOH filers ($52,427 married filing jointly) with 3 or more qualifying children
•$43,756 for single or HOH filers ($49,186 married filing jointly) with 2 qualifying children
•$38,511 for single or HOH filers ($43,941 married filing jointly) with 1 qualifying child
•$14,590 for single or HOH filers ($20,020 married filing jointly) with no qualifying children

Tax Year 2014 maximum credit:
• $6,143 with 3 or more qualifying children
• $5,460 with 2 qualifying children
•$3,305 with 1 qualifying child
• $496 with no qualifying children

60% of the errors in filing this credit are due to 3 things:
1. Claiming a child who does not meet the age, relationship, residency or joint return test mentioned above
2. Filing as a single or head of household when legally married
3. Over or under reporting income or business expenses to maximize the credit

Did You Know?

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•In an audit, the IRS will look closely at the following expenses: travel, entertainment, meals, and auto deductions.

•If you receive an audit letter from the IRS or Franchise Tax Board it could mean that their computer pulled your number.  Certain numbers can trigger this: high mortgage interest, high charitable contributions, high business expenses, business losses for many years, no W-2 for Officers, high travel expenses, etc.

“The first great gift
we can bestow on others is
a good example.”

~Thomas Morell, Librettist