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The federal government introduced the Earned Income Tax Credit (EITC) during the mid-1970s. Since then, it has become one of the most popular pieces of tax code and essential for many low-income families.
Identification
The EITC is a federal tax write-off meant to give lower-income individuals an incentive to work more and reduce the impact that Social Security taxes have on low-wage workers, according to the Internal Revenue Service (IRS).
Features
The IRS aims this credit at single or married couples still living together who have children. Single individuals without a dependent must be between ages 25 and 65 and not claimed as a dependent on another person's tax return, reports the IRS.
Considerations
In 2009, the maximum EITC a family could earn was $5,657 if they were married and had three or more children, reports the Tax Policy Center.
Tips
The IRS has an earned income credit tool that can help determine whether you qualify for the EITC, how much you are eligible to receive and any changes to EITC code.
Warning
Any attempt to claim the EITC by fraud, such as hiding assets or income or simply ignoring EITC regulations, results in a two to 10-year ban from claiming the credit.
Source:
IRS: It's Easier Than Ever to Find Out If You Qualify for EITC
IRS: EITC Questions and Answers
IRS: 2008 EITC: Should I Claim It?
Resource:
Taxation and the Family: What Is the Earned Income Tax Credit?
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