CHANGES TO EARNED INCOME CREDIT
July 21, 2021 - Douglas Myser
Changes to earned income credit. These changes may mean more people will qualify for the credit. New for taxpayers this year is a provision under the Taxpayer and Disaster Tax Relief Act of 2020 that allows taxpayers to use their 2019 earned income to figure their 2020 Eanred Income Tax Credit (EITC). If the 2019 earned income is more than the 2020 earned income. The EITC is a refundable tax credit which means workers may get money back, even if they owe no tax or the amount of the credit exceeds the amount of the tax owed. The EITC is complex and it varies by inomce, family size, and filing status. TO be eligible, taxpayers must have earned income as an employee or a self employed person, or certain disability income. Unemployment beneifts do not count as earned income. Therefore, having the opportunity to elect to use the taxpayer's income information from 2019, instead of 2020, when calculating eligibility might be beneficial for some taxpayers. Changes to earned income credit.
If the taxpayer worked in 2020 and had income of ess than $56,844, or if they worked during 2019 and made a similar amount, they may want to check their eligibility for the EITC with the 2019 income and again with the 2020 income to determine which amount produces a larger credit. The EITC can mean up to a $6000 credit, depending on income, filing status, and number of qualifying children. Workers without a qualifying child could be eligibile for a smaller credit up to $538. These are the basic qualifications for the credit. You must have a SocialSecurity number that is a valid number for employment and issued before the due date of the tax return. Not filing as married filing separatly: not file form 2555 or form 2555-EZ related fto foreign income. You must meet the investment income limitation and have earned income. Not be claimed as the qualifying chld of another person for 2020 and must be a U.S. citizen for the entire year.