Debt Consolidation Credit Counseling In Phoenix

In the world of taxes, tax credits help taxpayers to lower their tax bill. One such credit is the Earned Income Credit, or EIC. This credit was instituted as a way to help low income wage earners to rise above their circumstances.

The earned income credit began in 1975. The idea was that the poor were just getting poorer with the taxes they were paying on top of a low income job. The credit gives back to taxpayers a good portion of the money that they paid in taxes throughout the year. In that way, families could keep more of what they earned.

As time has passed, the amount that the earned income credit returns to individuals has gone up. Supporters of the EIC assert that the earned income credit does more for low income workers than simply increasing the minimum wage would. This is because people who are awarded the EIC use the money they get back to make purchases that boost their local economy.

There are three types of EIC eligible incomes. The first is money that is earned at a job. This money would include any wages earned by means of tips. If you are given a bonus by your employer, it can also be counted towards the earned income credit.

Self-employed earnings are also eligible for the earned income credit. If you own your own business but the money you earn with it is not enough to sufficiently care for your family, you may be able to receive the EIC. Any and everything your business earns can be counted.

Any money earned by one of your dependents can also be used to obtain the EIC. For example, the money that your teenage son or daughter makes while working summers or before and after school can be counted by you in order to get the earned income credit. This is true even if they have not earned enough to have to file for taxes themselves. The combined total of your income and your children's will be used to determine your EIC.

The money that your investments earn for you is counted as income by the IRS, as is money you collect because of unemployment. These sources of income may reduce your chances of getting the earned income credit. For example, if your investments earn you more than $2,800 in one year, you are disqualified from the EIC.

Sadly, many tax filers are not even aware that they qualify for the earned income credit. Many people think they don't qualify or just are not aware of the EIC. Some people do not earn enough to have to file their taxes, but still qualify for the EIC. Be sure to check into the EIC so that you don't miss out on this opportunity.