The IRS and its nationwide partners kicked off Earned Income Tax Credit (EITC) Awareness Day campaign on Jan, 27 to reach those who are eligible to claim the credit.
"This is an extremely important tax credit that helps millions of hard-working people every year," said IRS Acting Commissioner Doug O'Donnell. "But each year, many people miss out on the credit because they don't know about it or don't realize they're eligible. In particular, people who have experienced a major life change in the past year—in their job, marital status, a new child or other factors—may qualify for the first time. The IRS urges people to carefully to review this important credit; we don't want people to miss out."
The credit is for workers whose income does not exceed the following limits in 2022:
• $53,057 ($59,187 married filing jointly) with three or more qualifying children who have valid Social Security numbers (SSNs);
• $49,399 ($55,529 married filing jointly) with two qualifying children who have valid SSNs;
• $43,492 ($49,622 married filing jointly) with one qualifying child who have valid SSNs;
• $16,480 ($22,610 married filing jointly) with no qualifying children who have valid SSNs; and
• Investment income must be $10,300 or less.
Workers must file a tax return to be eligible for the credit.
The IRS estimated that about 20 percent of taxpayers eligible for the EITC eligible taxpayers do not claim it. Workers at risk for overlooking the EITC include those:
• Living in nontraditional homes, such as a grandparent raising a grandchild;
• Whose earnings declined or whose marital or parental status changed;
• Without children;
• With limited English skills;
• Who are veterans;
• Living in rural areas;
• Who are Native Americans; and
• With earnings below the filing requirement.
“When the federal, New York State, and New York City earned income tax credits are combined, they can be worth nearly $11,100 for a family with three or more children,” the New York State Department of Taxation and Finance said in a statement.
On her blog, National Taxpayer Advocate Erin Collins pointed out that “many EITC tax relief provisions included in the American Rescue Plan Act (ARPA) have expired and do not apply to TY 2022 returns, thereby reducing the average refund from last year.” They include the following:
Age of taxpayers without qualifying children: The special rules that changed the age requirements for taxpayers without qualifying children have expired and don't apply to 2022 returns. For 2022, taxpayers without qualifying children must be at least age 25 and under 65 at the end of the year to be eligible to claim the EITC. On top of that, the provisions lowering the minimum age for qualified former foster youth and qualified homeless youth have expired and don't apply to 2022.
Maximum credit amount declined for taxpayers without qualifying children: The maximum amount of the credit for taxpayers without qualifying children was significantly reduced to $560 for 2022 (down from a temporary expansion to $1,502 for 2021). The maximum credit amount for those with three or more qualifying children is $6,935 for 2022, a slight uptick from 2021.
Maximum adjusted gross income (AGI) amounts significantly reduced for taxpayers without qualifying children: Taxpayers without any qualifying children who file as single, head of household, or as a qualifying surviving spouse must have an AGI less than $16,480 (down from a temporary expansion to $21,430 for 2021). Taxpayers without any qualifying children and with married filing jointly filing status must have an AGI less than $22,610 (down from a temporary expansion to $27,380 for 2021).
Maximum amount of investment income: The max amount of investment income allowable to still qualify for the credit increases slightly to $10,300 for 2022.
No election to choose prior-year earned income: Unlike the past few years, taxpayers can't elect to use a prior year's earned income amount to compute the amount of the credit.
Married filers not filing jointly: Thanks to a permanent tax relief provision in ARPA, taxpayers who are married but separated from their spouses may be eligible for the EITC without having to file a joint tax return with their spouse. ARPA expanded the rules by allowing certain married taxpayers filing separately to claim EITC only if they didn't live with their spouse during the last six months of the year, or if they have a separation agreement or decree; and lived with their qualifying child or children for more than one-half of the year.
Qualifying children without Social Security numbers: Another permanent ARPA change enables taxpayers whose qualifying children don't meet the Social Security number requirement to claim the EITC as if they were a taxpayer without qualifying children.
In 2022, 31 million eligible workers and families across the country received about $64 billion in EITC, with an average amount of more than $2,000, the IRS reported.