Everything You Need to Know About Earned Income Credit and How to Apply

Business owners, families, and singles who are living on a low to moderate yearly income can apply for Earned Income Credit (EIC or EITC). It’s a legal way to get a tax refund or to cut down your annual tax by some percentage.

There are a few things that everyone who thinks is eligible for EIC needs to know before they apply. In this article, I’ll try to break down the following:

• Who can apply for EIC?
• How to apply for EIC?
• What documents to submit when claiming EIC?
• How to know whether your claim is approved or not?

So, let’s get started!

Who can apply for EIC?

Anyone who is an employee, a business owner, a farm owner, an investor, or legitimately earn money can apply for the tax refund. Of course, your yearly income or adjusted gross income shouldn’t exceed minimum criteria required for this type of tax benefit. Here you can find out about EIC income limits for 2017.

Other than that, you need to reside in the US and have a valid Social Security number for you and anyone who is listed with you (your spouse, qualifying children).

Your marital status is not as relevant as your financial status, but there are different criteria for singles and couples. Usually, the singles quota is $15.010 in case you don’t claim a qualifying child. In case you do, the allowance is based on the number of children you’re listing. For example, if you have one qualifying child, the quota is $39.617 or $45.207 for a joint application.

If you want to know whether you’re eligible for applying to EIC, check out this earned income credit calculator.

How to apply for EIC?

When it comes to applying for specific legal aids like EIC, you have several options to consider. The first one is filling out forms and claiming the EIC by yourself and/or with your spouse. This might be the trickiest way to do it, especially if it’s your first year to claim EIC. The downside of filling out the forms by yourself is that you might miss some details that can affect the status of your claim.

The other way is to hire a professional (a lawyer, for example) or a company who qualifies for providing this type of service. Of course, there is the downside of paying the fee for the service, but on the other hand, you’ll escape the mistake of filling out something wrong. On top of that, it can save your time which means you don’t have to run around and try to gather all the documents you need when claiming EIC.

What documents to submit when applying for EIC?

One of the toughest parts of every administrative affair is filling out the forms and gathering the documentation. EIC is especially challenging because many criteria should be met to be qualified to claim a tax refund. Here you can find a detailed list of documents and instructions necessary for claiming EIC.

How to know whether your claim is approved or not?

When submitting the federal tax refund either through an agency or by yourself, you should expect the answer on the status of your claim after the mid-February. In case your application is approved, you’ll get the further instructions by the IRS officials. If not, you can still apply next year.

Conclusion

Based on my opinion, Earned Income Credit is an excellent way to cut down the financial obligations for those of you who struggle with modest incomes. This is especially important in case of families with children because they need every help they can get.

Other than that, EIC can be helpful for business owners, as well. In case you’re in a startup phase, or you plan to go into the entrepreneurship for the first time, you might find this tax refund helpful in the beginning. Since enterprise requires a lot of risks, you’ll need a safety net in case something goes wrong or not as planned. Here you can read about the risks entrepreneurs take when starting a new business to get a more detailed insight on how EIC can help you achieve your financial goals.