Earned Income Tax Credit (EITC)

There’s a good chance some of your students who are parents will qualify for the Earned Income Tax Credit (EITC), which can help pare down the tax bill.  It may even provide a substantial refund.

If students have at least one child, they can claim the credit on Form 1040 or 1040A. If they don’t have dependents, they use Form 1040EZ to claim the credit.

According to the IRS, to qualify for the credit, the taxpayer’s earned income or adjusted gross income (whichever is greater) must be less than a certain amount.  To determine maximum income levels and the maximum amount of the credit, which changes annually, visit www.irs.gov. 

If they expect to qualify for the EITC and have at least one qualifying child, they may be eligible for the Advanced Earned Income Credit. This allows your students to receive part of the credit in each paycheck during the year instead of receiving a lump sum payment at the end of the year.

To see if they qualify for Advanced EITC, have your students ask their employers for Form W-5 and answer the questions on the back of the form. If they meet the requirements, then they complete the bottom of the form and return it to the employer. Based on income, the employer adds money to the take-home pay in each paycheck.

For more information, visit the IRS Web site and then search for “EITC,” or visit Building Native Communities: A Guide to Claiming the Earned Income Tax Credit (EITC) (2004), and/or the Annie E. Casey Foundation EITC site.