Millions of Taxpayers Are Leaving Thousands of Dollars Unclaimed Each Year

Larry Villano, Publisher of Loopholelewy.com

Millions of workers who earned $52,427 or less during 2014 may qualify for the Earned Income Tax Credit (EITC) for the first time this tax season. The EITC could be as much as $6,000. However, you must file a return to get this credit.

Keep in mind, the EITC is a refundable credit. This means, even if you had nothing withheld from your pay and have no tax liability, you can get a refund. In addition, if you're single and have no children, you may qualify for the EITC.

“About four out of five eligible workers and families get the credit they earned. That leaves millions missing the EITC every year," said IRS Commissioner John Koskinen. Last year, almost 28 million eligible workers and families received $66 billion total in EITC, with an average EITC amount of $2,400.

Because so many taxpayers are missing out on this credit, this tax season the Internal Revenue Service is partnering with community-based organizations across the country to promote Earned Income Tax Credit Awareness Day, an effort to alert millions of low and moderate-income workers who may be missing out on a significant tax credit that can be as much as $6,000. All across the United States, local officials and community organizations are holding events highlighting this key benefit.

The amount of EITC varies depending on income, family size and filing status. Those who work for someone else or those who run a business or farm and who earned $52,427 or less during 2014 could receive larger refunds if they qualify for the EITC. Even people without children could get up to $496 in EITC., There is a maximum credit of $6,143 for those with three or more qualifying children.

There are two types of tax credits:

  1. Non-refundable. Capped at your tax liability
  2. Refundable. Not capped at your tax liability. This is the type of credit the EITC is, which means, you can get a refund even if you owe no tax or had no taxes withheld from your pay.

The following two scenarios demonstrate the difference between non-refundable and refundable tax credits:

The following information applies to both scenarios:

  • Federal income taxes withheld from your pay was $1,000.
  • You have a tax credit of $500.
  • Your federal income tax is $1,200 (before applying your withholdings or the tax credit).

Result 1: Non-refundable tax credit

  • Zero Tax liability. No refund. Figured as follows:
    • Federal income tax: $1,200, minus
    • $1,500 (federal income taxes withheld, $1,000 plus the tax credit, $500)
    • Tax liability is zero ($1,200 minus $1,500)
      • $1,000 withholdings reduces tax to $200
      • $500 credit reduces remaining $200 tax to zero, leaving $300 of the credit unapplied.
      • $300 unapplied credit is not refundable; it is lost.

Result 2: Refundable tax credit:

  • Zero Tax liability. Refund $300. Figured as follows:
    • Federal income tax: $1,200, minus
    • $1,500 (federal income taxes withheld, $1,000 plus the tax credit, $500)
    • Tax liability is zero ($1,200 minus $1,500).
      • $1,000 withholdings reduces tax to $200
      • $500 credit reduces remaining $200 tax to zero, leaving $300 of the credit unapplied.
      • $300 unapplied tax credit is refundable

Remember, you must file a return to get the EITC. File now with TurboTax Federal Free Edition + Get your maximum refund as fast as possible with e-file and direct deposit. Don't assume you're not eligible for this credit. You could be one of the millions missing out!