Legal Services

Federal Earned Income Credit (EIC)

1997-2003 by Neighborhood Legal Services, Inc.

What is Earned Income Credit?

The Earned Income Credit (EIC) is money the IRS gives to people with variable income. You can get this credit whether or not you pay federal income tax.

Can I get this credit?

Families:

You may be eligible to get EIC if you meet all of the following:

1. your income, if you are single, is under $29,666 and under $30,666 if you are married.

2. you have at least one child (child, grandchild, or foster child), or a disabled dependent living with you last year, then you can receive up to $2547 from federal income tax and up to $764 from New York State.

3.you have two or more children living with you and earned less than $33,692 from a job, if you are single and $34,692, if you are married, and

4. you are not a married person filing a separate tax return, then you can receive up to $4,204 from federal income tax and $1,261 from New York State

Can I get this credit if I don't have children?

Yes. You may receive up to $376.00 from federal income tax, if

1. You are between 25 - 64 years of age;

2. Your household earned under $11,230.

How do I apply for the Earned Income Credit?

You must file a federal tax return form 1040A or 1040 and Schedule EIC. If you were not raising children, you can file any tax form, including the 1040EZ. If you want the IRS to figure out your credit for you, fill out the front half of Schedule EIC. You may also be eligible for a tax credit if you pay for child care. See your tax return for instructions.

How does it work?

Earned income credit will be "refunded" to you in one of two ways:

(1) If you owe taxes, the credit will be subtracted from the amount you owe.

(2) If you owe no taxes, the IRS will send you a check for the credit.

How will the Earned Income Credit affect my public assistance?

Federal EIC payments do not count as income or resources for public assistance purposes. EIC can count as a resource for food stamp purposes.

Generally, Federal EIC payments do not count as a resource the month you get the check or the following month. Resources include cash on hand, money in banks or investments, personal or real property, and vehicles. If you do not want your federal EIC to count as a resource, spend it within two months. No matter what you do with your federal EIC, you may need to prove to the DSS that you spent the money. Please keep all of your receipts.

An example of the way DSS would count your federal EIC is:

April 1-30 Receive EIC checkApril/May No effect on benefitsJune 1 Counts as resource - you will need to prove that you do not have more than $2,000.00 to your name.

However, under certain circumstances, federal EIC payments can be excluded for 12 months. EIC will be excluded for 12 months if you participated in the Food Stamps program during the time the credits were received and you received food stamps during that 12 month period. For more information on this exclusion contact NLS.

What can I do if DSS counts my Earned Income Credit as either income or resource?

If you get a notice from DSS telling you that EIC is being budgeted against your assistance, call and request a Fair Hearing immediately. Call us as soon as possible. We will review your case and tell you how to challenge the DSS decision or we may agree to take your case. To keep getting your present rate of benefits, you have to call for a Fair Hearing within ten days of the date on the Notice of Intent. You must ask for a Fair Hearing within sixty (60) days of the date of DSS's notice to you.

Is there any way to receive my Earned Income Credit before tax time?

Yes. You can get federal EIC in your paychecks. You must complete and return the Federal Tax Form W-5 to your employer before you can get it. Your paychecks will then be increased by the basic credit.

If you get EIC in your paychecks, you must file a federal Form 1040A or 1040 for the next year. If you got more EIC than you should have, you must repay any overpayment. If you got less than you should have, you will get the additional credit when you file your taxes.

Where can I get further information or forms?

To get further information or copies of the forms referred to in the above letter, you can get advice by calling the toll-free IRS phone service (1-800-829-1040). You can also have your tax forms filled out for free by visiting your local Volunteer Income Tax Assistance Center (VITA) from late January through April 15. Locations can be reached by calling 1-800-829-1040.

| | | |
| | |