by Heidi Copeland | Mar 23, 2021
Do you quality for the Earned Income Tax Credit (EITC), or Earned Income Credit (EIC)?
The Earned Income Tax Credit (EITC), or Earned Income Credit (EIC), is a refundable tax credit targeted to working people with low to moderate income.
EIC is a refundable credit. You can take advantage of the credit even if you do not owe any taxes. (https://www.irs.gov/pub/irs-prior/p596–2020.pdf)
Plus, there is a new feature… the LOOKBACK rule for Earned Income Credit (EIC).
As part of the Consolidated Appropriations Act of 2021, passed in December of 2020, you can use your 2019 earned income to determine your EIC and the Additional Child Tax Credit if your 2020 earned income is lower than your 2019 earned income. This is an especially important rule. You can use whichever income gets you the larger credit.
To qualify for the EIC:
- You must have at least $1 of earned income: wages, salary, tips, net self-employment earnings (income less expenses), or disability benefits up to a certain threshold
- You file a federal income tax return for the tax year even if you do not owe any tax or are not required to file a tax return
- Taxpayer (and spouse) and any qualifying child must each have a valid Social Security number issued before the due date of your return
- Taxpayer must be a U.S. citizen or resident alien for the entire year
- Filing status can be married filing jointly, head of household, qualifying widow(er), or single. (You can’t claim the EITC if your filing status is married filing separately)
- Your tax year investment income must be $3,650 or less for the year
- Cannot file form 2555 relating to foreign earned income
- Rules for qualifying children:
- Child(ren) must be under age 19—age 18 or younger—at the end of the tax year and younger than you or your spouse (if you file jointly) OR under age 24 and a full-time student and younger than you or your spouse (if you file jointly) OR any age if permanently and totally disabled
- The child must either be your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, or a descendant of any of these individuals, which includes your grandchild, niece, or nephew
- The child must have lived with you for more than half of the tax year (some exceptions apply)
- Only one person can claim the same child for the same tax year
The EIC may be disallowed if the taxpayer incorrectly files for the credit but does not meet these requirements.
by Heidi Copeland | Jan 22, 2021
Taxes, without a doubt, conjure up emotions from elation to dread! Do you owe? Are you getting a refund? Are you uncertain?
This is a significant statement because income tax returns cannot be filed electronically or by mail until the IRS has opened the season.
Please, do not be influenced to apply for a tax refund loan, typically known as a RAL (refund anticipation loan), if you are not in a crisis for the money. An RAL is a loan based on the anticipated amount of your federal income tax refund. Many tax filing services will offer you a RAL if… you file with their service. Your loan amount will be the value of your anticipated refund minus fees and/or interest charges.
Know, too, that your loan will go directly to the lender once the IRS processes your income tax return.
Be VERY careful with refund anticipation loans. An obvious positive attribute of the loan is you get money quickly – before the season even opens. Another, once the lender receives your refund, the loan is paid. But, what happens if your tax refund is smaller than the anticipated income tax return? You now will have an outstanding loan that will need to be paid back.
The Earned Income Tax Credit (EIC or EITC) is a refundable tax credit for low- and moderate-income workers. For 2020, the earned income tax credit ranges from $538 to $6,660. The amount depends on income and number of children; people without kids can qualify, too.
If you qualify for the EITC, you need to know, by law, the IRS cannot issue refunds for people claiming the EITC or the Additional Child Tax Credit (ACTC) before mid-February. The IRS cannot release these refunds before February 15, but the IRS is saying to expect your refund by the first week of March. Note, too, the law requires the IRS to hold the entire refund − even the portion not associated with the EITC or ACTC. This law change, which took effect in 2017, helps ensure that taxpayers receive the refund they are due by giving the IRS more time to detect and prevent fraud.
Now, while waiting for the tax filing season to open, is a great time to get income tax documents together. Once the filing season opens, being organized and prepared will help facilitate a seamless transition to filing your income tax return. The IRS recommends that taxpayers file their returns electronically to reduce errors and receive refunds more quickly.
Filing an average income tax form is also easy. There are many FREE income tax filing sites.
Income $72,000 and below: Contact your local UF/IFAS Extension office and they can help you by:
- Finding FREE federal tax filing on an IRS partner site
- Finding guided preparation – simply answer questions
- Providing a link to a FREE Facilitated Self-Assisted (FSA) service with electronic forms you fill out and file yourself
Income above $72,000: Contact your local UF/IFAS Extension office and they can help you by:
- Providing a link to a FREE Facilitated Self-Assisted (FSA) service with electronic forms you fill out and file yourself
- Helping you learn how to prepare papers for meeting with a tax professional
- Providing you with basic tax preparation information
Be careful in your decision making when it comes to filing income taxes. Choosing e-file and direct deposit for refunds remains the fastest and safest way to file an accurate income tax return and receive a timely refund. It is amazing to know the IRS issues more than 9 out of 10 refunds in less than 21 days.
Source: https://www.irs.gov/filing/free-file-do-your-federal-taxes-for-free#what
by Samantha Kennedy | Mar 19, 2020
The deadline for filing your federal income tax return is April 15, 2020. (Photo source: IRS.gov)
The IRS has identified a new version of a phishing email scam targeting tax professionals. The fake email states the preparer’s EFIN has been put on a temporarily hold and warns the EFIN will be suspended unless the preparers open an embedded document and confirm or deny that they submitted the Form 1040. The embedded “1040” document likely contains malware.
The IRS reminds all tax professionals that they are targets of cybercriminals seeking to steal client data or the practitioners’ identities. Thieves use many variations of phishing emails such as this. The fake emails are characterized by an urgent message (your EFIN will be suspended) and try to entice recipients to open a link or attachment. The IRS urges all tax professionals to be on alert and take security steps to protect their clients and their businesses. Review Publication 4557, Safeguarding Taxpayer Data, for how to be safer.
Some simple steps include:
- Using the multi-factor authentication option offered by tax software to protect accounts from unauthorized access.
- Use strong password protections on all devices.
- Never open suspicious emails, links and attachments may carry malware.
- Use strong security software and keep it updated.
For more information, please visit https://www.irs.gov/.
by Heidi Copeland | Jan 26, 2018
The Internal Revenue Service (IRS) announced recently the nation’s tax season begins Monday, January 29, 2018. The IRS also reminds taxpayers claiming certain tax credits to expect a longer wait for refunds.
Nevertheless, many software companies and tax professionals accept tax returns before January 29, 2017. Be aware! These prepared returns cannot be submitted until the IRS system opens. Any money received prior to the opening of the Income Tax season may cost you! Early refunds are often charged processing fees as well as interest.
In 2017, under the change required by Congress in the Protecting Americans from Tax Hikes (PATH) Act, the IRS is to hold refunds claiming the Earned Income Tax Credit (EITC) and the Additional Child Tax Credit (ACTC). The IRS expects the earliest EITC/ACTC-related refunds to be available in taxpayer bank accounts or on debit cards starting February 27, 2018, if these taxpayers choose direct deposit and there are no other issues with their tax return.
For taxpayers not claiming the EITC/ACTC-related refunds, three weeks is the normal time it takes for a tax return to be processed, factoring in weekends and holidays. In fact, calling the IRS will not expedite your return/refund; typically, an IRS representative can only research the status of your refund 21 days after you file electronically and 6 weeks after you mail your paper return.
Nevertheless, it is your inherent right to both pay taxes and communicate with the IRS about the status of your taxes. You can start checking on your refund status electronically 24 hours after filing your taxes electronically or three weeks after mailing a paper return.
Note: The filing deadline to submit 2017 tax returns is Tuesday, April 17, 2018, rather than the traditional April 15 due date. This year, April 15 falls on a Sunday, and this usually would move the filing deadline to the following Monday – April 16. However, Emancipation Day – a legal holiday in the District of Columbia (DC) – will be observed on that Monday, which pushes the nation’s filing deadline to Tuesday, April 17. Under the tax law, legal holidays in the District of Columbia affect the filing deadline across the nation.
Choosing to both e-file and provide a means for directly depositing refunds remains the fastest and safest way to file an accurate income tax return and receive a refund.
Adapted from the IRS Website.
by Heidi Copeland | Jan 30, 2015
In the early ’70s, Gary Iskowitz was doing graduate work as well as teaching tax law while working for the Internal Revenue Service (IRS). Mr. Iskowitz saw a growing problem with questionable tax preparers who were scamming low-income people in his area. He did not like what he saw! Consequently, he proposed training a few like-minded student volunteers to go into the community to prepare free tax returns for under-served residents.
The rest, they say, is history! Starting with this volunteer effort, 40 years later, the Volunteer Income Tax Assistance (VITA) Program is still going strong.
VITA still is designed to promote and support free tax preparation service for the under-served in both urban and non-urban locations. Service is targeted to low-to moderate- income individuals, persons with disabilities, the elderly, and limited English-speaking individuals.
Why? Just as in Gary Iskowitz’ time, this program is an effort to provide both a valuable community service and a powerful learning experience for the participants. Not only does a tax payer get their taxes done for free, the local community benefits from the monies spent by the tax payer. Plus, the IRS is pleased because citizens are in compliance with federal law.
Check out your local VITA sites this year. Around North Florida, there are numerous volunteer sites being readied for the 2014 tax year. Some of these sites are traditional, where taxes are done in person; some sites prepare taxes via SKYPE – the telecommunications application software that specializes in providing video chat and voice calls from computers. Using SKYPE as an application to accessing VITA has been well received, especially in rural locations.
If you plan to take advantage of any of the VITA programs this year, be sure to bring the proper documentation. A return cannot be prepared without the appropriate documentation. For a complete list of documentation needed for a VITA-prepared tax return, contact your local VITA tax preparation site. Where are these sites? Call your local helpline 2-1-1 or visit http://irs.treasury.gov/freetaxprep/.
