How to Figure Earned Income Credit
Some people who file their taxes may appear to have more taxable income to support their family than they should. Middle-class and lower-income earners can quickly see their paychecks dwindle if they support children. Day care costs, clothing and extra food can add up. However, the government has allowed people to apply credits to their taxable incomes to offset these costs. This is known as an earned income credit.
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Instructions
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Calculate your taxable income. This includes wages earned listed on your W-2s and 1099s, minus your standard deduction or itemized deductions. If you use a tax program, you will automatically go through these steps before reaching the earned income tax credit worksheet.
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Determine whether your taxable income will qualify you for earned income credit. The taxable income limit may change every tax year but always includes whether you are married or single and the number of children you have. Check the IRS website to see what the current limits are. If your taxable income is above the current limits, you won't be able to file.
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Check to see if your citizenship status still makes you eligible for earned income tax credit. You must be a U.S. citizen or a resident alien for the entire tax year.
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Consider your family demographics to see if you will still qualify for earned income tax credit. There are several other factors besides the amount of money you make. You cannot get earned income credit if someone else can claim you or your spouse (if filing jointly) as a dependent. The number of children you have will also determine how much of a credit you can claim. The children must also have lived with you more than half of the tax year and cannot be claimed by anyone else.
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Double-check to make sure you have entered the correct information, especially your tax filing status. If you are married, ensure you are not filing separately or as the head of household. You'll also need to ensure the social security numbers for your family members are correctly entered.
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Tips & Warnings
Consult a professional tax preparer if you feel that you received invalid tax statements from your employer.
Deliberately inputting false information could land you stiff fines and possible jail time.
