Earned Income Tax Credit

The Earned Income Tax Credit (EITC) is a refundable tax credit for families and individuals who have income from employment. It increases the amount refunded to a taxpayer or reduces the amount of tax owed. As of December 2020, about 25 million eligible workers and families received about $62 billion in EITC. The average amount of EITC received nationwide was almost $2500. Approximately 22% of all eligible taxpayers did not claim the earned income tax credit, according to the latest available IRS statistics. You must file a tax return to claim your EITC.

Twenty-nine states plus New York City, San Francisco, and Montgomery County, Maryland, maintain their own EITC program. New Jersey again expanded their program for the 2021 tax year by lowering the age requirement from 21 to 18.

Number of Qualifying ChildrenSingle/Head of Household or Widow(er), Income Must be Less ThanMarried Filing Jointly, Income Must be Less ThanMaximum Federal CreditMaximum NJ State Credit
No Child$21,430$27,380$1,502$601
One Child$42,158$48,108$3,618$1,447
Two Children$47,915$53,865$5,980$2,392
Three or More Children$51,464$57,414$6,728$2,691

EITC Central has tools and information for IRS partners, community organizations, employers, government agencies and offices and tax preparers. EITC Assistant is an online tool to estimate if an individual or family may qualify by answering a number of questions.

Free assistance to prepare and file your federal income tax return is available from a number of organizations and programs. United Way and H&R Block partner to offer MyFreeTaxes. All income levels are eligible to file both federal and state returns for free using MyFreeTaxes.com.

Traditional IRS Free File provides free online tax preparation and filing options on IRS partner sites to taxpayers whose adjusted gross income (AGI) is $73,000 or less. To use Free File you must start by going to the Free File website. (If you go to a company’s website first, you may be charged a fee.) Details on Free File options are available at IRS’ Taxpayer Advocate Service website.

The Volunteer Income Tax Assistance (VITA) program offers free tax help to people who generally make $57,000 or less, persons with disabilities and limited English speaking taxpayers who need assistance in preparing their own tax returns. IRS-certified volunteers provide free basic income tax return preparation with electronic filing to qualified individuals. AARP Foundation Tax-Aide provides in-person and virtual tax assistance to anyone free of charge with a special focus on taxpayers who are over 50 or have low-to-moderate income.

The IRS provides a Find a Location for Free Tax Help page, updated February through April. The NJ 2-1-1 Partnership maintains a listing of VITA and AARP sites. Residents of South Jersey, including Atlantic, Burlington, Camden, Cape May and Cumberland Counties, as well as residents of Philadelphia and Montgomery County, can get tax preparation help from the non-profit Campaign for Working Families.

Non-profits, advocacy groups, and government agencies can participate in outreach efforts by promoting the NJ EITC Page and the NJ EITC Marketing Toolkit. Groups interested in conducting an outreach campaign or promoting EITC on social media should also visit the Center on Budget and Policy Priorities’ Tax Credit Outreach Kit.

The New Jersey Division of Taxation provides a Notice to Employers and a Notice to Employees. IRS also makes available and encourages employers to distribute IRS Notice 1015, Have You Told Your Employees About the Earned Income Credit (EIC)?”.

IRS2Go, is the free and official mobile app of the IRS. You can use it to check your tax refund status, find free tax preparation services, or even send a payment to Uncle Sam. Read a December, 2021 overview here.

Sources: IRS, Center on Budget and Policy Priorities, NJ Division of Taxation

Last updated: February 3, 2022

Copyright © 2022 by Michael R. Swayze

 

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