Claiming the Earned Income Tax Credit

The American Rescue Plan Act of 2021 made several changes to the Earned Income Tax Credit. Some of these changes were temporary for the 2021 tax year only others are permanent.

There are several changes that expand the EITC for 2021 and future years:

• Singles and couples who have Social Security numbers can claim the credit even if their children don’t have SSNs. In this instance, they would get the smaller credit available to childless workers.
• More workers and working families who also have investment income can get the credit. Starting in 2021, the limit on investment income is increased to $10,000. After 2021, the $10,000 limit is indexed for inflation.
• Married taxpayers who do not file a joint return with their spouse may qualify for EITC:
  • Must have a qualifying child living with them for more than half the year;
  • Cannot have the same principal residence as the other spouse for the last six months out of the year or has a separation decree or agreement with the spouse and are not a member of the same household by the end of the taxable year; and
  • Qualifying individuals must check the appropriate check box on Schedule EITC.

• English version of the EITC Assistant
• la Versión en Español del Asistente
• Earned Income Credit Tools and Information – Taxpayer Advocate Service (irs.gov)
• Claiming the EITC or CTC Credit this year? Here are some tips… – Taxpayer Advocate Service (irs.gov)
• EITC Home page

Find out if you qualify

The easiest way to find out if you qualify is to use the IRS’s Earned Income Tax Credit (EITC) Assistant Tool. The tool is available in English and Spanish. It will ask you questions about yourself and other family members to see if you qualify for the credit, and if so, it will estimate the amount.

NOTE: When you look at the rules to qualify for EITC, be sure you have the information for the correct tax year — each tax year has different limits on your earned income.

Qualifications

About YOU

You and any other family members claimed, such as your spouse or qualifying child must have a valid Social Security number SSN. Remember, singles and couples who have Social Security numbers can claim the credit, even if their children don’t have SSNs.

Married taxpayers filing separate returns may qualify for EITC  (see changes expanding EITC for 2021 and future years in the What do I need to know? section above)

You must be a U.S. citizen or resident alien all year.

About YOUR MONEY

You must have earned income. This includes:

• • Earned Income: Taxable wages, salaries, tips and other pay from your employer.
    • Nontaxable employee pay, such as certain dependent care benefits and adoption benefits, isn’t earned income. However, if you’re in the military, there’s an exception for nontaxable combat pay, which you can include as earned income.

• • Net earnings from self-employment.
  • Gross income received as an independent contractor or statutory employee.
    • Certain employees who receive income for work performed as independent contractors may see Box 13 of their IRS Form W-2 checked as “Statutory employee.”
  • If you retire on disability, taxable benefits you receive under your employer’s disability retirement plan are earned income until you reach minimum retirement age.
    • Here are the income charts for eligibility.
  • The American Rescue Plan Act of 2021 expanded the limits for investment income. For 2022 the maximum limit is $10,300 and for 2023 it is $11,000.

You can’t claim the EITC if you need to file IRS Form 2555.

About YOUR FAMILY

Generally, if you aren’t claiming a qualifying child, you must meet these rules (please see below for temporary changes):

• You must be at least age 25, but under 65;
• You can’t be the dependent of another person;
• You can’t be a qualifying child of another person; and
• You must have lived in the United States more than half of the year.

If you have children but they don’t qualify for EITC purposes, you may be able to still claim the EITC without children.

If you are claiming a qualifying child:

• You can’t be a qualifying child of another person;
• The qualifying child must have a Social Security Number (SSN);
• The child generally can’t be married;
• Your qualifying child can’t be used by more than one person to claim the EITC; and
• The child must pass relationship, age, residency, and joint return tests.

Relationship Test

The child must be related to you.

Many different relationships qualify for EITC, including:

• Son or daughter (whether by blood or adoption), stepchild, qualified foster child, or their descendants (grandchild or great-grandchild), or
• Full, half, and step-siblings or their descendants (niece or nephew), or
• This means some relationships aren’t covered. For instance, you can’t claim the child of your boyfriend/girlfriend, a neighbor, or a cousin even if you provide care for that child.

Age Test

The child must be:

• Under age 19 at the end of the tax year and younger than you (or your spouse, if filing jointly), or
• Under age 24 at the end of the tax year, and a full-time student for at least 5 months of the year, and younger than you (or your spouse, if filing jointly), or
• Permanently and totally disabled at any time during the year, regardless of age.

Residency Test

The child must have lived with you in the United States for more than half of the tax year. This doesn’t mean six months in a row. For example: If your child lives with you during the school year but spends summers elsewhere, the months the child lives with you count toward the six months. The IRS also recognizes that temporary absences of the taxpayer or the qualifying child due to a special circumstance (such as illness, school attendance, business, vacation, military service, or detention in a juvenile facility) may count as time the child lived with the taxpayer.

You may need to show the IRS that you’re entitled to the EITC.

The IRS may send you a notice asking you to provide documents to show you’re entitled to claim the credit. The notice you get will tell you the documents you need to send to claim the credit (birth certificates, school records, etc.).

You may use these templates to get the requested information from the school, healthcare provider, or childcare provider to verify your qualifying child’s residency.

School

Healthcare Providers

Childcare Providers

Sometimes you may not have the specific types of documents requested by the IRS. IRS Form 886-H-EIC, Documents You Need to Send to Claim the Earned Income Tax Credit on the Basis of a Qualifying Child or Children, lists many options, but remember that different combinations may also be acceptable. The IRS has developed a toolkit to help you identify what documents you might provide to the IRS to determine if your child is a qualifying child.

Let’s say the IRS wants medical records to show the child lived with you during the year in question, and you can’t get those, or your child didn’t go to the doctor. There may be other records that show your child lived with you, such as social service records, childcare provider records, or official mail addressed to the child. You may want to check to see if there’s an agency that has a record of your address and any additional information that shows the child lived with you. If so, it may be able to give you a signed letter on their official letterhead showing these details.

A certain document alone generally doesn’t show you are entitled to receive the credit, but in combination with other records, it can demonstrate that you are entitled to the credit.

Note: If you get school records to verify one or more of the tests, remember a school “year” really is just part of the calendar year because school starts in the autumn of one calendar year and ends in the spring of the next calendar year. You’d need to ask for two school years to cover one calendar year. You might have to get the school to write a letter, rather than provide just the transcripts, to show the child’s guardian during the calendar year and the address on record during that time.

Special Rules

There are special EITC rules for members of the military, ministers, members of the clergy, those receiving disability benefits, and those impacted by disasters. If you fall into any of these categories, please visit the IRS Special EITC Rules page.

The PATH Act prevents you from filing retroactive returns or amended returns claiming EITC, ACTC, or the American Opportunity Tax Credit (AOTC) if the reason you are filing is because you now have the type of valid Taxpayer Identification Number (TIN) required for each credit but didn’t have such TIN before the due date of the return.

If for any reason you or one of your family members didn’t receive a valid “taxpayer identification number” by the due date of the tax return (including extensions), you cannot file a past due return or an amended return to claim any of these credits. A valid taxpayer identification number could be an SSN, Individual Taxpayer Identification Number (ITIN), or Adopted Taxpayer Identification Number (ATIN) depending on the requirement for each credit.

You can’t file a past due return or an amended return to claim the EITC for anyone on the return without an SSN that’s valid for employment by the due date of the return including a valid extension.

To claim the credit, file your tax return

To claim the credit, if eligible, you must file a tax return – whether you normally need to file or not. You need to complete an IRS Form Schedule EIC, Earned Income Credit and file it with your return, if you’re claiming a qualifying child. If you don’t have a qualifying child, you claim the credit on your tax return.

If you need free help preparing your tax returns, type “Free Tax Prep” in the search box on www.IRS.gov and use the Volunteer Income Tax Assistance (VITA) locator tool to find a volunteer site near you. You can also prepare and electronically file your own tax return with professional software using the IRS’s Free File program.

The Taxpayer Advocate Service is an independent organization within the IRS that helps taxpayers and protects taxpayers’ rights. We can offer you help if your tax problem is causing a financial difficulty, you’ve tried and been unable to resolve your issue with the IRS, or you believe an IRS system, process, or procedure just isn’t working as it should. If you qualify for our assistance, which is always free, we will do everything possible to help you.

Visit www.taxpayeradvocate.irs.gov or call 1-877-777-4778.

Low Income Taxpayer Clinics (LITCs) are independent from the IRS and TAS. LITCs represent individuals whose income is below a certain level and who need to resolve tax problems with the IRS. LITCs can represent taxpayers in audits, appeals, and tax collection disputes before the IRS and in court. In addition, LITCs can provide information about taxpayer rights and responsibilities in different languages for individuals who speak English as a second language. Services are offered for free or a small fee. For more information or to find an LITC near you, see the LITC page on the TAS website or Publication 4134, Low Income Taxpayer Clinic List.

• I Received a Letter from IRS about My Credit; What Should I Do?
• 26 USC 2: Definitions and special rules
• 26 USC 32: Earned income
• Treas. Reg. 1.32-2: Earned income credit for taxable years beginning after December 31, 1978
• Who qualifies for the Earned Income Tax Credit?
• EITC Help and Assistance
• Held or Stopped Refunds