People are rushing to file their tax returns before the April 18 deadline. Unfortunately, many are unaware that they are – or were – eligible for hundreds or even thousands of dollars worth of tax refunds, credits and exemptions they didn’t claim. The IRS has more than $1.1 billion in unclaimed tax credits and refunds from 2007, but time is running out. Those who were eligible in 2007 can still claim this money if they file by April 18.
Many people don’t realize that they can retroactively file returns or amend previously filed tax returns and receive refunds for up to three prior tax years. People who learn they were eligible for a certain exemption or tax credit from 2007, for example, can still file a return for that year and receive that money – but only until April 18. The IRS owes hundreds or even thousands of dollars to people who didn’t know they were eligible for that money. It is critical right now for families to not leave any money lying on the table; and many people are leaving hundreds of dollars untouched simply because they don’t know it is there.
One tax credit that can be confusing is the Earned Income Tax Credit (EITC). A common misconception exists that a person must also claim a child as a dependent on their tax return in order to receive the EITC. This is not true. A person can claim this credit if the child in question lives with them for more than 50 percent of the year and otherwise qualifies them for the EITC.
A “qualifying child” (the child who qualifies the household for the credit) can be a son, daughter, adopted child, stepchild, foster child or descendent of any of them, such as a grandchild. A brother, sister, stepbrother, stepsister, or a descendant of any of them, such as a niece or nephew, also will qualify the household to receive the credit. The person who has a qualifying child living with them for more than 6 months out of the year may be eligible for several hundred dollars. People must meet income guidelines and have earned income to receive the credit. The size of the credit varies depending on the amount of adjusted gross income.
2010 Tax Year EITC Income Limits
Earned income and adjusted gross income (AGI) must each be less than:
· $43,352 ($48,362 married filing jointly) with three or more qualifying children
· $40,363 ($45,373 married filing jointly) with two qualifying children
· $35,535 ($40,545 married filing jointly) with one qualifying child
· $13,460 ($18,470 married filing jointly) with no qualifying children
2010 Tax Year maximum credit
· $5,666 with three or more qualifying children
· $5,036 with two qualifying children
· $3,050 with one qualifying child
· $457 with no qualifying children
*The American Recovery and Reinvestment Act (ARRA) provides a temporary increase in EITC and expands the credit for workers with three or more qualifying children. These changes are temporary and apply to 2009 and 2010 tax years.
People who do not earn enough to be required to file an income tax return also are at risk for missing the EITC because filing a return is the only way to claim it. To understand who is at risk for failure to claim the EITC because they don’t have to file a return, see the rules about who must file at http://www.irs.gov/pub/irs-pdf/p501.pdf. People who owe no taxes can still get the EITC. Finally, many workers who are at least 25 and under 65 may not know that they can qualify for an EITC benefit for low-income workers who do not have children living in their homes.
Unemployment or change of income mid-year can cause people to miss the EITC and certain other tax credits and refunds because those who made enough money to be ineligible for many credits last year, may not think to claim them this year if they suffered a loss or reduction of income. It is very important for families to understand and take advantage of all the credits that exist.
The rules can get tricky. You can read more about the Earned Income Tax Credit, find eligibility screening tools, and find information about locating free help with taxes at http://www.irs.gov/individuals/article/0,,id=96406,00.html?portlet=2.
There have been several other tax credits available during the last three years, including Residential Energy Credits, the Child and Dependent Care Credit, Child Tax Credit, Additional Child Tax Credit, Homeownership Credits, Missouri Property Tax Rebate and others.
If you find out you were eligible for tax credits in the three prior tax years, you can amend your return by filing a 1040-X or, if you didn’t file at all, still file a past return now. There will be no penalty if you didn’t owe any taxes or were due a refund. While 2007 returns must be filed by April 18, returns for any year since then can still be filed for at least the next year.
Call 1-800-TAX-1040 at the IRS for additional information about federal tax credits or 573-751-3505 at Missouri Department of Revenue for information about state tax credits or the Missouri Property Tax Rebate for elderly or disabled low-income renters or homeowners.
Brenda Procter, M.S.
Associate State Extension Specialist & Instructor
Personal Financial Planning Department
MU College of Human Environmental Sciences
E-mail: ProcterB@missouri.edu
No comments:
Post a Comment