EITC: What Could You Do with an Extra $2,000?

Working families may get a larger tax refund this year because of the Earned Income Tax Credit (EITC), but to get it, you must claim it. Today, January 31, marks the 8th National EITC Awareness Day, a nationwide effort to increase awareness about EITC and free tax preparation sites.

If you worked last year and had income of less than $51,567 you should check out your eligibility for EITC. On average, in Illinois the EITC adds $2,378 to working families' refunds. It can mean an additional $487 for people without children up to $6,044 for those with three or more qualifying children. Last year, more than 27 million workers received $67 billion in EITC refunds.

Remember that tax credits are different than tax deductions. Tax credits are subtracted from the amount of tax you owe. If your EITC amount is greater than the amount you owe, then you will receive money back! In contrast, tax deductions reduce the amount of your income that is used to calculate the tax amount you owe, and usually require that you itemize your taxes. While this is nice, tax credits are better.

The amount of credit you may receive from the EITC depends. It varies by income, family size and filing status. To be eligible, you must have earned income or certain disability income. This means you must have income from wages, self-employment or farming. You do not have to be married or have children to qualify. You can find out more about the EITC at the IRS's EITC Home Page.

Also, a tax professional or trained volunteer can help you determine if you qualify for EITC rules. In addition, you may qualify for free tax return preparation. The IRS Volunteer Income Tax Assistance (VITA) and the Tax Counseling for the Elderly (TCE) Programs offer free tax help for taxpayers who qualify.

The VITA Program generally offers free tax help to people who make $52,000 or less and need assistance in preparing their own tax returns. The TCE Program offers free tax help for all with priority assistance to people who are 60 years of age and older, specializing in questions about pensions and retirement issues unique to seniors. Find a volunteer free tax return preparation site near you.

One more piece of good news: if you qualify for the federal EITC, you will also be able to claim the Illinois EITC! Once you have this extra cash, think about saving some of it for a rainy day.