Earned Income Tax Credit - A Tax Break for Working Families
The Earned Income Tax Credit (EITC) is a refundable tax credit for working families and individuals. It increases the amount refunded to a taxpayer or reduces the amount of tax owed. The amount of the credit varies according to income and family size. In 2006 New Jersey taxpayers claimed over $880 million under the Federal EITC program with an average credit of $1870.
New Jersey wage earners can also take advantage of the state's own expanded EITC program. For 2007, wage earners who are eligible and file for a Federal earned income credit can also receive a New Jersey credit in the amount equal to 20% of their Federal benefit. Previously, New Jersey set the income eligibility limit for families at $20,000.
Who is eligible? Working parents are eligible for the EITC if their child(ren) lived with them for at least half the year. Foster parents are eligible if their foster child(ren) lived with them for more than half of the year. Wage earners not raising children may also qualify for the federal EITC.
How much? The credit is based on gross earned income, filing status, and the number of any qualifying children in the home.
- Families with two or more children who earn less than $37,783 in 2007 ($39,783 if married filing jointly) are eligible for a credit of up to $4,716.
- Families with one child who earn less than $33,241 in 2007 ($35,241 if married filing jointly) are eligible for a credit of up to $2,853.
- Working individuals age 25 to 65 without a qualifying child who earn less than $12,590 in 2007 ($14,590 if married filing jointly) are eligible for a credit of up to $428.
Free tax assistance is available to individuals with low or moderate income, seniors, and people with disabilities. Seniors can get tax preparation help at Tax-Aide sites around the state. Other qualifying taxpayers can go to Volunteers in Tax Assistance (VITA) sites. A list of VITA and Tax-Aide sites in New Jersey are provided here through the cooperation of the IRS and Congressman Steve Rothman's office. The list is saved as an Excel spreadsheet, current as of January 18, 2008 and subject to change. You may wish to call the Tax-Aide or VITA site to schedule an appointment.
For more information about the federal Earned Income Tax Credit call the IRS at 800-829-1040. You can also contact the New Jersey Department of Taxation at 888-895-9179. Tax help is also available from AARP by calling 888-AARPNOW (888-227-7669) or visiting their AARP Tax-Aide webpage. Another way to locate the nearest free tax preparation site is by calling 2-1-1 and inquiring about tax assistance.
Another free tax preparation service is the Free File Alliance a free federal tax preparation and electronic filing program for eligible taxpayers developed through a public-private partnership between the Internal Revenue Service (IRS) and the Free File Alliance LLC, a group of private sector tax software companies.Free File allows all taxpayers with an Adjusted Gross Income of $52,000 or less to prepare and e-file their federal tax returns for free.
The IRS has 12 Taxpayer Assistance Centers throughout New Jersey where you can receive help in preparing an individual income tax return, if you qualify for the Earned Income Tax Credit or your income is less than $40,000.
If you qualify for the federal EITC you may be eligible to have the Advance EIC Payment built into your paycheck by completing a W-5 form and giving it to you employer. You should complete the W-5 each January, as long as you remain eligible for the tax credit.
To get your agency or company involved in promoting these programs, contact the Center on Budget and Policy Priorities at 202-408-1080 or email them to receive the 2008 Earned Income Tax Credit Outreach Kit.
Useful websites to obtain additional information or tax assistance include:
Internal Revenue Service EITC Information
IRS Publication 596
NJ Division of Taxation 2007 Income Tax and EITC Info
NJ EITC Flyer
Newark Asset Building Coalition
Newark Now
Greater Trenton EITC and Asset Building Campaign
New Jersey Citizen Action
