Putting America back to work

Tax credit is big help in hard times

With job losses through layoffs and outsourcing, more people are qualifying

Chart: Deepika Meht

Today so many American families are struggling to make ends meet, yet many don’t know there are benefits available during tax time to help them.

One is the Earned Income Tax Credit (EITC), a refundable, federal income tax credit for low-income working individuals and families.

With job losses through layoffs and outsourcing, families who may have not been eligible in the past, may now qualify. And while you may not be eligible, a friend or family member could be.

Congress approved the tax credit legislation in 1975 in part to offset the burden of Social Security taxes and to provide an incentive to work. When the EITC exceeds the amount of taxes owed, it results in a tax refund to those who claim and qualify for the credit.

To qualify, taxpayers must meet certain requirements and file a tax return, even if they did not earn enough money to be obligated to file a tax return to the Internal Revenue Service.

The EITC has no effect on certain other public assistance benefits. In most cases, EITC payments will not be used to determine eligibility for Medicaid, Supplemental Security Income, food stamps, low-income housing or most Temporary Assistance for Needy Families payments.

When you file your 2008 Income Tax Return, you must also file form EIC with your 1040 or 1040A form.

The 2008 eligibility rates and allowed credits are as follows:

• For a family with one child and earnings less than $33,995 for a single individual, and $36,995 for a married couple, the credit is $2,917.

• For families with two or more children and earnings less than $38,646 for a single individual and $41,646 for a married couple, the credit is $4,824.

• For workers without children who earn less than $12,880 for a single individual and $15,880 for a married couple, the credit is $438.

• Military personnel may also be eligible, particularly reservists and National Guard members who have been called to active duty and are raising children with a reduced income.

• Free tax preparation services are also available to those who qualify for the credit through Volunteer Income Assistance (VITA).

"If you qualify for assistance, you should take advantage of it," said Earl Henry, a UAW Local 598 retiree living in Elmira, Mich., who has been doing volunteer tax preparation under the VITA program for eight years.

A member of the UAW Region 1D Retirees Advisory Council, Henry recalled the story of a UAW retiree who paid $96 to get his taxes prepared by an outside firm but received only a $98 tax refund. That’s a whopping $2 gain.

"You can get it done for free or go somewhere else and pay big bucks," he said.

Bonnie Reffitt

Bonnie Reffitt is an international representative in the UAW Community Services Department. Sandra Davis contributed to this story.