The Earned Income Tax Credit and how to use it

The Earned Income tax credit is beneficial to many lower-income taxpayers. It is not a difficult credit to figure out when completing tax forms, but it must be used properly to avoid penalties. The IRS has complete details available on their website in order to help taxpayers determine their eligibility.

Individuals or married taxpayers, with or without children in low-income brackets, receive a reduction in the amount of taxes they owe or even an increase in refund. For the 2013 tax year, a taxpayer with three qualifying children is able to receive a credit of up to $6,044. If the taxpayer does not owe any taxes, this total amount can be received as a refund from the government.

The basics of claiming the credit

In order to claim the Earned Income tax credit, the taxpayer must have their own Social Security number. Using someone else’s number will cause a very quick flag by the IRS. The taxpayer must also have earned income. Unemployment compensation is not considered earned income and can not be included.

The filing status of the taxpayer can not be Married Filing Separately and the taxpayer can not be the qualifying child of another individual. The individual must also be a U.S. citizen or resident alien for the full year, or a nonresident alien filing a joint return with a U.S. citizen or resident alien.

The taxpayer wishing to claim the Earned Income credit does not have to have children, but must be between the ages of 25 to 64 at the end of the tax year. The taxpayer must have lived in the U.S. for more than six months out of the year and not be a dependent of another individual.

Any taxpayer wishing to claim the Earned Income Credit must meet the income limits, tax updates and maximum credit amounts. Earned Income credit guidelines for the 2013 tax year are already available.

Additional qualifications

When claiming a child for the Earned Income credit the child must meet Qualifying Child Rules and have a valid Social Security number. A qualifying child can not be claimed by more than one taxpayer and rules are in place to determine who can claim the child in a dispute. The investment income of the taxpayer wishing to claim the credit must be less than $3,300.


The Earned Income Credit can be disallowed if the taxpayer does not report all of their income, claims a child or children they are not entitled to claim, uses false Social Security numbers or attempts other types of fraud. The IRS will forgive honest mathematical errors, but intentional abuse result in the loss of the ability to take the credit for up to ten years, even if the taxpayer does qualify in subsequent years.

As a note, some taxpayers receive Advance EITC on their payroll checks. This would reduce or eliminate the amount of credit they would receive when filing their taxes. The Education Jobs and Medicaid Assistance Act of 2010 eliminated the Advance Earned Income credit as of December 31, 2010.