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 2008, 24.6 million eligible families and individuals claimed Earned Income credits worth $48.7 billion. Yet twenty-five percent of eligible families do not claim the EITC refund.
New Jersey wage earners can also take advantage of the state's own expanded EITC program. 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 22.5% 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.
- Workers who were raising one child in their home and had income of less than $35,463 (or $40,463 for married workers) in 2009 can get an EIC of up to $3,043.
- Workers who were raising two children in their home and had income of less than $40,295 (or $45,295 for married workers) in 2009 can get an EIC of up to $5,028.
- Workers who were raising three or more children in their home and had income of less than $43,279 (or $48,279 for married workers) in 2009 can get an EIC of up to $5,657.
- Workers who were not raising children in their home, were between ages 25 and 64 on December 31, 2009, and had income below $13,440 (or $18,440 for married workers) can get an EIC up to $457.
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. NJ 211 provides a list of sites. You may wish to call the Tax-Aide or VITA site before going.
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 web page. Another way to locate the nearest free tax preparation site is by telephoning 2-1-1 to inquire 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 be placed on the 2010 Tax Credit Outreach Kit mailing list.
Useful web sites to obtain additional information or tax assistance include:
Newark Asset Building Coalition
Greater Trenton EITC and Asset Building Campaign
Newark Now
New Jersey Citizen Action
Internal Revenue Service EITC Information
IRS Publication 596
NJ 2009 Income Tax and EITC Info
NJ EITC Flyer
