EARNED INCOME TAX CREDIT

1. EARNED INCOME TAX CREDIT Earn it! Keep It! Save It! 2011

2. EITC • What is the Earned Income Tax Credit (EITC)?The earned income credit (EITC) is a tax credit for certain people who work and have earned income in tax year 2011  under $49,078. A tax credit usually means more money in your pocket. It reduces the amount of tax you owe. The EITC may also give you a refund.

3. EITC To claim the EITC on your tax return, you must meet all of the following rules: • Must have a valid Social Security Number • You must have earned income from employment or from self-employment. • Your filing status cannot be married, filing separately. • You must be a U.S. citizen or resident alien all year, or a nonresident alien married to a U.S. citizen or resident alien and filing a joint return. • You cannot be a qualifying child of another person. • If you do not have a qualifying child, you must: • be age 25 but under 65 at the end of the year, • live in the United States for more than half the year, and • not qualify as a dependent of another person • Cannot file Form 2555 or 2555-EZ (related to foreign earn income)

4. INCOME LIMITS Tax Year 2011 earned income and adjusted gross income (AGI) must each be less than: • $43,998 ($49,078 married filing jointly) with three or more qualifying children; • $40,964 ($46,044 married filing jointly) with two qualifying children; • $36,052 ($41,132 married filing jointly) with one qualifying child; • $13,660 ($18,740 married filing jointly) with no qualifying children. Tax Year 2011 maximum credit: • $5751 with three or more qualifying children; • $5112 with two qualifying children; • $3094 with one qualifying child; • $464 with no qualifying children. Investment income must be $3,150 or less for the year.

5. RULES Who is a qualifying child? Your child is a qualifying child if your child meets three tests. The three tests are: • Relationship • Age • Residency

6. RELATIONSHIP TEST To be your qualifying child, a child must be your: • Son, daughter, stepchild, eligible foster child, or a descendant (for example, your grandchild) of any of them, or • Brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant of any of them (for example, your niece or nephew), or • Adopted child. An adopted child is always treated as your own child.  The term "adopted child" includes a child who was lawfully placed with you for legal adoption, or • Eligible Foster Child.  A person is your eligible foster child if the child is placed with you by an authorized placement agency or by judgment, decree, or other order of any court of competent jurisdiction.

7. AGE TEST Your child must be: • Under age 19 at the end of 2011, • A full-time student under age 24 at the end of 2011, or • Permanently and totally disabled at any time during 2011, regardless of age.

8. RESIDENCY TEST • Your child must have lived with you in the United States for more than half of 2011.

9. What is Earned Income ? Earned income includes all the taxable income and wages you get from working. There are two ways to get earned income: • You work for someone who pays you or • You work in a business you own. Taxable earned income includes: • Wages, salaries, and tips • Union strike benefits • Long-term disability benefits received prior to minimum retirement age • Net earnings from self-employment

10. EITC What if I was denied the EITC last year? If your EITC for any year was denied or reduced for any reason other than a math or clerical error, you must attach a completed Form 8862, Information to Claim Earned Income Credit After Disallowance, to your next tax return to claim the EITC.

11. EITC Where can I get more information? Find out if you are eligible for the Earned Income Tax Credit (EITC) by answering some questions and providing basic income information. Available in English and Spanish…. EITC ASSISTANT on www.irs.gov Publication 596, Earned Income Credit Going to a local VITA site for tax preparation