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What is the earned income credit?
The earned income tax credit (EITC) is a refundable tax credit available to working low-income individuals and families. Eligible taxpayers can get a refund check even it they owe no taxes.
Low-income workers have two options for receiving the EITC. They can file a tax return with a schedule EIC at the end of the tax year, or they can apply to receive a portion of the credit in their paychecks throughout the year. To claim the credit in advance, you must complete IRS Form W-5 and give it to your employer.
The amount of the credit depends on an individual’s income (both taxable and nontaxable) and the number of qualifying children. Taxpayers must have earned income (wages, salary, tips, self-employment income, etc.) to qualify for the credit, but if their total earned income is too great, they cannot claim the EITC.
