From the Desk of Lauran L. Stevenson
Earned Income Tax Credit: IRS Reports that up to 1.5 million people fail to claim
The Earned Income Tax Credit (“EITC”) is a federal income tax credit for workers who do not earn a high income ($53,505 or less for 2016) and meet other eligibility requirements. Because it is a refundable credit, those who qualify and claim the credit could pay less federal tax, pay no tax or even get a tax refund.
The EITC could put an extra $2, or up to $6,269, into a taxpayer’s pocket. Nevertheless, the IRS estimates that as many as 1.5 million people with disabilities miss out on this valuable credit because they fail to file a tax return. Many of these non-filers fall below the income threshold requiring them to file. Even so, the IRS urges them to consider filing anyway, because the only way to receive this credit is to file a return and claim the EITC.
To qualify for the EITC, the taxpayer must have earned income. Usually, this means income either from a job or from self-employment. But, taxpayers who retired on disability can also count as earned income any taxable benefits they receive under an employer’s disability retirement plan. These benefits remain earned income until the disability retiree reaches minimum retirement age. The IRS emphasized that social Security benefits or Social Security Disability Income (SSDI) do not count as earned income.
Additionally, taxpayers may claim a child with a disability or a relative with a disability of any age to get the credit if the person meets all other EITC requirements. Taxpayers can use the EITC Assistant on IRS.gov to determine eligibility, estimate the amount of credit and more.
People with disabilities are often concerned that a tax refund will impact their eligibility for one or more public benefits, including Social Security disability benefits, Medicaid, and Food Stamps. The law is clear that tax refunds, including refunds from tax credits such as the EITC, are not counted as income for purposes of determining eligibility for benefits. This applies to any federal program and any state or local program financed with federal funds.