EITC, Vita Sites And Free File

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. You must file a tax return to claim your EITC.

Twenty-eight states, including New Jersey, maintain their own state EITC program. New Jersey taxpayers may receive a credit equal to 37% of their federal credit. It is based on their employment earnings, filing status, number of children and adjusted gross income (AGI).

Income Limits and Maximum EITC Credits

Number of Qualifying Children Single/Head of Household or Widow(er), Income Must be Less Than Married Filing Jointly, Income Must be Less Than Maximum Federal Credit Maximum NJ State Credit
No Child $15,270 $20,950 $519 $192
One Child $40,320 $46,010 $3,461 $1,281
Two Children $45,802 $51,492 $5,716 $2,115
Three or More Children $49,194 $54,884 $6,431 $2,380

Free assistance to prepare and file your federal and state income tax returns are available from a number of organizations and programs, including a United Way listing of New Jersey VITA Sites. You can also access the IRS VITA Site Locator Tool. Free, easy to use online software is available to taxpayers with an Adjusted Gross Income of $66,000 or less through the Free File program.

The EITC Assistant is an online tool to help determine if a family may qualify for EITC by answering a number of questions. The IRS also publishes a one page fact sheet, IRS Notice 797 and a forty page booklet on EITC, IRS Publication 596.

Employers, have you told your employees about the Earned Income Tax Credit? If not, distribute copies of IRS Notice 1015. The New Jersey Division of Taxation also publishes a Statement to Employees with helpful links and phone numbers.

Nonprofits, advocacy groups and government agencies can participate in outreach efforts by distributing the Division of Family Development’s NJ 2018 EITC Flyer which is included on their EITC page. Groups interested in conducting an outreach campaign or promoting EITC on social media should subscribe to the Center on Budget and Policy Priorities’ Get It Back Campaign.

Another option is to download IRS2Go, the official IRS mobile app. You can use it to check the status of your tax refund or find free tax prepartion services, etc.

Philadelphia Area and South Jersey residents can find free tax site locations by visiting the
Campaign for Working Families website.

Information and Resources To Claim the Earned Income Tax Credit

The purpose of this article is to bring attention of the Earned Income Tax Credit – both federal and state – to New Jerseyans and to provide links to various EITC resources.

According to national statistics, about 20% – 25% of eligible households do not claim the EITC benefits. Those who go without this income boost can lose out on thousand of dollars in tax credits or refunds. For example, workers who earned too little to be required to file a tax return must complete a return to receive an EITC refund.

EITC outreach material is available from a number of agencies and organizations. They include:

EITC Awareness Day – January 27, 2012

The Internal Revenue Service has declared January 27, 2012 as Earned Income Tax Credit (EITC) Awareness Day. It is a program enacted in 1975 during the Nixon Administration and expanded during the Reagan years. Although technically a tax program, it is considered one of the principal social programs for working families. Nationally, in 2011 over 26 million taxpayers received $59 billion in EITC tax refunds. EITC rewards work and reduces poverty.

An IRS spokesperson recently stated, “If you worked any part of last year (2011) and your income was around $49,000 or less see if you qualify for the Earned Income Tax Credit, or EITC.” It can put extra money in a family’s pocket, up to $5700. In New Jersey in 2011 552,000 households received $1.17 billion via the EITC credit, with an average refund of $2,117. For a single parent with one child it is estimated that EITC effectively raises wages by $1.25 an hour.

An EITC Tax Tip Video makes a number of suggestions. They include:
1) Use free brand name tax software through IRS’ Free File program if your adjusted gross income is $57,000 or less. For details visit the IRS Free File: Do Your Federal Taxes For Free page.
2) Utilize the services of any of the 400 nationwide IRS Taxpayer Assistance Centers to get face-to-face tax help. In New Jersey there are twelve local offices located in Cherry Hill, Edison, Fairfield, Freehold, Jersey City, Mays Landing, Mountainside, Newark, Paramus, Parsippany, Paterson, and Trenton. Visit the link for locations and telephone numbers.
3) Take advantage of local and free tax preparation sites – known as VITA or AARP Tax-Aide sites – during the tax season. For a comprehensive and up-to-date list of New Jersey tax assistance sites visit the NJ 2-1-1 website. To locate the nearest VITA site, call 800-906-9887, if you do not have Internet access. In New Jersey, dial 2-1-1 or 877-652-1148 to find the closest free tax preparation site.

There are a couple tips that I also would like to pass on. They fall into the category of consumer protection and financial literacy. Does it make sense to pay $100 or even $200 to a commercial tax preparer if you can have your tax preparation done for free and get your refund via direct deposit? You should be familiar with the term “rapid refund” and currently known as a “refund anticipation check”. They are nothing more than expensive loans. In the consumer affairs community these services are known as Refund Anticipation Loans or RALs. For a good explanation of how expensive RALs are see a recent National Consumer Law Center report. Fortunately, 2011 may be the last year in the life of these loan schemes.

In the past couple years a number of VITA programs have partnered with financial institutions to enable tax filers to open accounts with the idea of getting a tax refund quicker via direct deposit. New Jersey consumers are fortunate in having available to them low-cost, low-volume basic checking services known as New Jersey Consumer Checking Accounts. If you want to promote financial literacy and encourage consumer education spread the word about consumer checking accounts.

For additional information on tax preparation programs and organizations that sponsor them, visit the New Jersey Community Resources’ NJ Earned Income Tax Credit web page.

EITC Awareness Day – January 28, 2011

Earned Income Tax Credit Can Put Money in Your Pocket

You could be eligible to get more money back from the IRS – as much as $5,666.

If you earned less than $48,362 from wages, self-employment or farming last year, you may qualify for a refundable tax credit called the Earned Income Tax Credit, or EITC. But you must file a federal income tax return claiming the credit to get it.

EITC can be a big financial boost for working people hit by hard economic times. Many individuals who saw their incomes drop in 2010 may qualify for the first time.

The credit has been making the lives of workers a little easier for more than 35 years. Yet it remains little known, possibly because people move into and out of eligibility as their financial, marital and parental statuses change. IRS estimates four of five eligible people claim and get their EITC.

Unlike other tax credits, both EITC eligibility and the amount of the credit is based on several factors such as the source and amount of your income, or combined incomes if married, whether you have qualifying children and how many. Workers without children also may qualify.

The amount of the credit peaks then phases out at certain income limitations depending on filing status and other factors. You may qualify for EITC even if you had no federal tax withheld or are not otherwise required to file.

The credit is complex, but worth exploring. It’s even more valuable if your state has a corresponding tax credit. (New Jersey does have their own.)

The online EITC Assistant at www.irs.gov/eitc can help determine your eligibility and estimate the amount of your credit. Free help preparing your return and claiming EITC is available at volunteer income tax assistance sites and IRS Taxpayer Assistance Centers. To locate a volunteer site, call your community’s 211 or 311 number for local services or call the IRS at 1-800-906-9887. Find an IRS Taxpayer Assistance Center in the blue pages of your telephone directory.

Remember: if you are eligible, you must file a federal income tax return, even if you are not otherwise required to file, and you must specifically claim the credit to get it. Find more information about EITC at www.irs.gov or in your tax software package.

According to the IRS, rural and non-traditional families — such as grandparents raising grandchildren — childless workers, and non-English speaking taxpayers are among those who most frequently overlook the credit.