Millions of low-income Americans eligible for tax refund this year through Earned Income Tax Credit

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This tax season, millions of low-income Americans are eligible for a one-time tax break that could save them big bucks. The federal earned income tax credit, which goes to people in the lowest-paying jobs, is tripled for a group of workers who typically don’t benefit much: adults without children.

For the tax year just ended, low-income workers without children can receive a credit of up to $1,500, nearly triple what the credit was worth in 2020. US rescue planthe $1.9 trillion pandemic relief bill signed last year by President Joe Biden, expanded credit, raised income limits and expanded the age of eligible workers for 2021.

“For the first time, the credit is now available to both young workers and seniors,” Gwen Garren, director of refundable credits program management at the IRS, said in a blog post. Publish.

This tax season, anyone 19 or older who made money in the last year and isn’t a full-time student can apply for the expanded credit.

Who is eligible

The US bailout expanded who can claim the EITC by increasing income limits for childless workers. Taxpayers without children who have earned up to $21,430 from jobs, concerts or self-employment can claim the credit when they file their taxes this season. (Most years, workers earning more than about $16,000 are not eligible for the EITC.) Taxpayers can also choose to use 2019 earnings to qualify for the credit, which is helpful for those who have lost their job in 2020.

The IRS also removed age limits from previous years for the EITC. Previously, only workers aged 25 to 64 were eligible. This tax season, any worker 19 or older who meets the income guidelines can qualify for the credit, as well as 18-year-olds who are homeless or have been in foster care.

“The US bailout allows anyone 19 years of age or older, who is not a full-time student [and] who has income, to claim the expanded EITC. It expanded both age and income and increased credit,” said Kris Cox, deputy director of federal tax policy at the Center on Budget and Policy Priorities, a left-leaning think tank.

Political experts estimate that between 17 and 20 millions workers will benefit from the expanded credit, including older and younger workers who would normally get no credit, and those who will receive more money than usual.

“Completely excluded”

The Earned Income Tax Credit has been called America’s most effective anti-poverty program, with about 20 million households receiving it in 2019. The program, first created under President Gerald Ford, is designed to reward hard work and has been credited with lifting more than 5 million people above the poverty line.

Unlike many tax credits, which can only reduce the income tax a person pays to zero, the EITC is refundable. This means that it puts money in the pockets of workers even though they are not subject to taxes.

However, most years workers without children get a small credit. Last year, a single worker had to earn $15,800 or less to qualify for the tax relief, and the maximum credit for individuals was only $540. On the other hand, a single parent of two children earning the same amount of $15,800 would be entitled to a credit of $5,800.

“This meant that people who worked for very low wages and received such a meager EITC, as well as young working adults and older working adults, were completely excluded” from EITC benefits, Kris said. Cox, deputy director of federal fiscal policy at the Center on Budget and Policy Priorities.

The lower value of the EITC for childless workers means that these people are less likely to claim the credit despite being entitled to it. About two-thirds of eligible taxpayers without children apply for the EITC each year, compared to more than 80% of taxpayers with children, according to Cox.


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Meanwhile, the credit boom comes at a welcome time for many Americans, as runaway inflation consumes most of wage gains of low-wage workers.

“While these people without dependent children don’t face the cost of childcare, they certainly pay more for food, gas, rent. For these people, these necessities may be out of reach,” Aidan Davis, senior state policy analyst at the Institute on Taxation and Economic Policy, told CBS MoneyWatch.

Worker-backed organizations are pushing for the change to be permanent, and a one-year extension is included in the House passage version of the Build Back Better Act.

Investment income limits are raised

Until this year, the EITC was limited to workers with investment income of $3,650 or less. This year, that limit was raised to $10,000, meaning workers who receive money in the form of interest, dividends or the sale of investments can still claim the EITC.

Unlike the other changes made to the tax credit, this one is permanent: the $10,000 cap will now apply and will be indexed to inflation.

How to claim the credit

Most commercial tax software will ask taxfilers about their income to determine if they are eligible for the EITC.

Taxpayers should not have to pay anything to claim the credit. Anyone whose income is low enough to qualify also has the right to file their tax return for free, either through the IRS Free file program or one of hundreds of tax preparation sites run by volunteers Across the country.

For those who file a paper declaration or via Free File Forms to fill out, the EITC appears on the Form 1040 – no additional documentation is required. (Taxpayers with children will also need to file Schedule EIC.)


IRS faces challenges during tax filing season

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How long will we have to wait

People filing for the EITC often have to wait longer than other filers to start getting refunds — by law, those refunds must be kept until mid-February to give the IRS more time to review the requests. This means that even if taxpayers file their returns at the start of tax season, they usually don’t receive a refund until mid-March.

After this period, EITC claimants should not have to wait any longer than other taxpayers to get their money. Typically, most taxpayers will receive their refunds in 21 days or less, assuming they file their return electronically.

This year, however, many taxpayers you’ll probably have to wait longer. The IRS is facing an unusually large backlog of tax returns from previous tax seasons, and the agency’s commissioner has warned that it is facing “huge challenges.”

States also offer earned income break

In addition to federal credits, most states have implemented their own earned income tax credit. This tax season, residents of 28 states and the District of Columbia can get an additional—usually smaller—credit on its state taxes.

State credits vary widely in terms of income and types of eligible households, as well as the amount of money they return. Depending on an individual worker’s situation, a state’s earned income tax credit can add 3% to the value of their federal credit (in Montana) or double the credit (for childless workers in Washington). , DC)

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