these difficult economic times, knowing that you may qualify for thousands of
dollars in federal tax credits is great news.Even if you haven’t qualified in the past, you could be eligible now. The Earned
Income Credit and Child Tax Credit are tax benefits for people who earn low to
moderate incomes. If you worked in 2014, you may be eligible!
How much is the Earned Income Credit (EIC) worth?
· If you lived with a qualifying child* for
more than half the year, and you earned less than $38,511 ($43,941 if married),
you can claim up to $3,305 in EIC benefits.
· If you lived with two children and earned
less than $43,756 ($49,186 if married), you can claim up to $5,460.
· If you lived with three or more children and
earned less than $46,997 ($52,427 if married), you can claim and EIC up to $6,143.
· Workers not raising a family may be eligible
for up to $496 if they earned less
than $14,590 ($20,020 if married) and are between the ages of 25 and 64.
What about the Child Tax Credit (CTC)?
Workers raising children can maximize
their tax credit benefits by claiming the CTC,
worth up to $1,000 for
each child under the age of 17. To be eligible for the CTC, a worker must have
taxable earned income above $3,000 in 2014.
Workers can even get FREE tax filing assistance!
tax credits you’ve earned in your pocket. Instead of paying to get your tax
return filed, you can get free help filing your tax return through the IRS
sponsored program VITA (Volunteer Income Tax Assistance). VITA volunteers are
trained to help workers claim tax credits for which they are eligible. See Claim YOUR Tax Benefits! to learn more about free tax
filing assistance programs.
Understanding the EIC and
was laid off this year from her job as a marketing assistant, will get the
boost she needs from the EIC and CTC.As
a single mother of twochildren, both
under the age of 17, Janet earned $45,000 in 2013 and was ineligible to claim the
In 2014 Janet
worked for about six months before being laid off, and was unable to find
another job.Her total income during the
year was $21,000. When she files her tax return, she will receive an EIC worth
also be eligible for a CTC, worth $2,000. These credits offset any income taxes
she owes, and she will be able to use the remaining balance from the refund to
keep up with her family’s needs.
It’s easy for us to think of this year’s tax refund as free money coming
to us courtesy of Uncle Sam. However, the truth of the matter is that the check
you receive is a return of your own hard earned money. And since you’re going
to get your own money back, why not use it to get ahead of your financial
In 2014, sixty-nine percent of those polled by American
Consumer Credit Counseling indicated that they had used their tax refund to
pay down debt and get ahead on monthly expenses, including rent, utilities, and
car payments. In 2013, twenty-six percent indicated they would put their refund
into savings, while forty-five percent said they would use it to pay down
credit card debt. The National
Retail Federation saw that forty-six percent of its 2014 survey respondents
intended to cushion their emergency savings with their returns, with nearly six
in 10 young adults between 18 and 24 putting their refunds into savings.
The results of these surveys are indicative of a growing, budget-friendly
and money-savvy trend: Americans are opting out of tax-time splurging and are
focusing on getting ahead. Here are a few easy ways to get yourself set up for
success as tax season approaches:
Take advantage of a Volunteer
Income Tax Assistance (VITA) program. VITA programs
offer free tax help to those who generally make $53,000 or less, persons
with disabilities, the elderly, and limited English speakers. Qualified
individuals can receive basic income tax return preparation assistance
from IRS-certified volunteers.
8888 to split your refund.Why rack up
more debt on your credit card in an emergency when you can set aside
savings to cover it interest-free? The IRS provides taxpayers with
multiple avenues to receive and save their refunds. Take advantage of
direct deposit to your checking account to pay off debts and automatically
deposit a portion of your refund to your savings account.
Need more inspiration to save? Enter
to win with SaveYourRefund.
SaveYourRefund has 101 cash prizes, including 100 weekly prizes of $100
and one grand prize of $25,000.
Take the America
Saves pledge to make a commitment to yourself to save. Get emails to
keep yourself motivated and/or sign up for text message reminders to get
tips and advice about your savings goals.
We know that making smart financial decisions isn’t always easy. So
whether you’re just starting to look at ways to get ahead in 2015 or are
already planning to put your refund towards your goals, remember that your tax
refund doesn’t have to go to one place. When you get your hard earned money
back, put a piece of it towards paying down debts AND save some for a rainy day.
It really is that easy.
Tammy Greynolds works
for America Saves, managed by the
nonprofit Consumer Federation of America (CFA), which seeks to motivate,
encourage, and support low- to moderate-income households to save money, reduce
debt, and build wealth. Learn more at americasaves.org.
Education credits: Understand your Form 1098-T If you’re a college student or parent of a college student, you may be eligible for an education credit. Most students receive a Form 1098-T, Tuition Statement, from their educational institution. Form 1098-T contains helpful instructions and other information you’ll need to claim education credits on your federal tax form. These credits help offset your out-of-pocket expenses for tuition and fees, books and equipment.
Your educational institution is required to file a Form 1098-T with the IRS and provide you a copy when there is a reportable transaction. A reportable transaction includes payments received, amounts billed or refunds made for tuition and related expenses. The form should also give you other information for the educational institution, such as adjustments made for prior years, the amount of scholarships or grants, reimbursements, or refunds, and whether you were enrolled at least half time or were a graduate student.
In most cases, you should receive Form 1098-T from the eligible educational institution by Jan. 31. If you don’t receive it by the end of January, be sure to contact your school.
An education credit helps with the cost of higher education by reducing the amount of tax owed on your tax return. If the credit reduces your tax to less than zero, you may get a refund. There are two education credits available: the American Opportunity Tax Credit and the Lifetime Learning Credit.To claim an education credit, you must file Form 1040 or 1040A with Form 8863, Education Credits (American Opportunity and Lifetime Learning Credits). See Instructions for Student on Page 4 of Form 1098-T for more details.
To see if you qualify for a credit, and for help in calculating the amount of your credit, see Pub. 970, Tax Benefits for Education; Form 8863, Education Credits; and the Form 1040 or 1040A instructions. You can also use the IRS’s Interactive Tax Assistant tool to help determine if you are eligible for these benefits.
Don’t overlook these important credits. Find out more about education credits by visiting the Education Credits Web page on IRS.gov.
The Earned Income Credit (EIC) is a refundable tax credit for certain workers.
Who May Claim the EIC?
You may be able to claim the EIC for 2013 if you worked and all four of the following conditions apply.
1. You (and your spouse, if ling a joint return) have a valid social security number (SSN) issued by the Social Security Administration. For more information on valid SSNs, see Pub. 596, Earned Income Credit (EIC).
2. Your 2013 earned income and adjusted gross income are both under $37,870 ($43,210 if married ling jointly) if you have one qualifying child; under $43,038 ($48,378 if married ling jointly) if you have two qualifying children; under $46,227 ($51,567 if married ling jointly) if you have three or more qualifying children; or under $14,340 ($19,680 if married ling jointly) if you do not have a qualifying child. For a definition of earned income, see the 2013 instructions for Form 1040, 1040A, or 1040EZ.
3. Your ling status on your 2013 tax return is any status except married ling a separate return.
4. You were not a qualifying child of another taxpayer in 2013. If you do not have a qualifying child, you must also meet these conditions.
a. You, or your spouse if ling a joint return, were at least age 25 but under age 65 at the end of 2013. (You meet this condition if you, or your spouse if ling a joint return, were born after December 31, 1948, and before January 2, 1989.) If your spouse died in 2013, see Pub. 596.
b. You cannot be claimed as a dependent on someone else’s 2013 tax return.
c. Your home, and your spouse’s if ling a joint return, was in the United States for over half of 2013. If you are in the military on extended active duty outside the United States, your home is considered to be in the United States during that duty period and you may be able to claim the EIC.
You cannot claim the EIC if any of the following conditions apply.
1. Your 2013 investment income (such as interest and dividends) is over $3,300. See Pub. 596 for more information.
2. You le either Form 2555 or Form 2555-EZ (relating to foreign earned income).
3. You were a nonresident alien for any part of 2013 unless you were married to a U.S. citizen or resident and elected to be taxed as a resident alien for the entire year. See Pub. 519, U.S. Tax Guide for Aliens, for more information.
Who Is a Qualifying Child?
Any child who meets all four of the following conditions is a qualifying child.
1. The child is your son, daughter, stepchild, foster child, brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant of any of them (for example, your grandchild, niece, or nephew). An adopted child is always treated as your own child. An adopted child includes a child lawfully placed with you for legal adoption. A foster child is any child placed with you by an authorized placement agency or by judgment, decree, or other order of any court of competent jurisdiction.
2. At the end of 2013, the child was under age 19 and younger than you (or your spouse, if ling jointly); or under age 24, a student, and younger than you (or your spouse, if ling jointly); or any age and permanently and totally disabled.
3. The child lived with you in the United States for over half of 2013. If the child did not live with you for the required time, there are exceptions if the child was born or died during the year, the child is presumed to have been kidnapped by someone who is not a family member, or there was a temporary absence.
4. The child does not le a joint income tax return for 2013. There are additional rules if a child is married or is the qualifying child of more than one person. For details, see the 2013 instructions for Form 1040, 1040A, or 1040EZ.
How Do You Claim the EIC?
If you are eligible, claim the EIC on your 2013 income tax return. If you have a qualifying child, you must also fill in Schedule EIC and attach it to your Form 1040 or Form 1040A. If eligible, you can claim the EIC to get a refund even if you have no tax withheld from your pay or owe no tax. For example, if you had no tax withheld in 2013 and owe no tax but are eligible for a credit of $800, you must le a 2013 income tax return to get the $800 refund.
This notice provides the basic requirements to qualify for the EIC. Refer to the instructions for Form 1040, 1040A, or 1040EZ; Pub. 596; or www.irs.gov/eitc for details. You can get IRS forms and publications at IRS.gov or by calling 1-800-TAX-FORM (1-800-829-3676).