Arizonans received more than $778 million in federal earned income tax credit money last year, and yet that didn't include everyone eligible for it. The Internal Revenue Service is urging all taxpayers in Arizona to find out whether they're eligible for the credit when filing their 2007 federal income tax returns.
"The whole idea behind the earned income tax credit is to reward folks for working," said David Williams, the IRS's director of refundable credits. "Last year, just over 22 million taxpayers (nationally) received just under $44 billion. We believe that represents somewhere between 75 percent and 80 percent of all taxpayers who are eligible for the earned income tax credit."
The credit is the federal government's largest benefits program for working families, he said. It is a refundable credit that can increase a refund or reduce the amount of taxes due, or prompt a refund if there was no federal tax withheld.
To qualify for the credit, a taxpayer's income must be $39,783 or less. Depending on the amount of the earned income, qualifying taxpayers can receive:
A credit of $4,716 with two or more qualifying children.
A credit of $2,853 with one qualifying child.
A credit of $428 with no qualifying children.
Taxpayers must file a return in order to receive the credit.
"There are a number of reasons why people don't claim it, the largest of which is ignorance about whether they're eligible for the credit or even the existence of the credit," Williams said. "We've gotten a bit of evidence that suggests that folks who don't make enough money to file a tax return don't think they're eligible for the credit, and in fact that's one of the biggest reasons we don't see claims, because the people aren't making enough money."
Many taxpayers with low incomes believe they are ineligible, as do taxpayers who are caring for children who may not be their offspring, he said. For example, an aunt who is taking care of her niece may think she doesn't qualify, he said.
"The child must be your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, or a descendent of any of those." said Debra Holland, IRS director of the earned income tax credit. "You can see how a niece falls into that category."
All taxpayers by now should have received their W2s, so there's no better time than the present to file your return and find out if you're eligible for the credit, Williams said.
"This is something you claim because it is your right," he said.
Questions about the earned income tax credit?
• Contact the Internal Revenue Service at (800) 829-1040 for information about the credit and local free tax assistance sites.
• Visit www.irs.gov for tools to determine eligibility.