Applying for the Earned Income Tax Credit is more important than ever this year due to the important COVID-related changes.
This year, tax filers will see significant changes as a result of COVID-related stimulus checks and unemployment, which are not considered earned income. To allow more individuals to still claim their EITC this year, taxpayers who may have been out of work for much of 2020, for example, will be allowed to file tax returns based on their 2019 or 2020 earned income instead to remain eligible for the EITC.
The EITC is available to working families and individuals who meet certain income requirements. The amount of the refund depends on income, filing status and number of qualifying children claimed on their returns. For example:
- A single individual with no children who works and makes less than $15,820 could get back as much as $538.
- A married couple with three or more children who files a joint return, with a combined income of less than $56,884could receive the maximum EITC of $6,660.
This year, individuals who have been out of work in 2020 can still benefit from the EITC by choosing to calculate their EITC based on their 2019 income. This tax season, filers can choose to use either their 2019 or 2020 earned income to calculate the Earned Income Tax Credit on their 2020 income tax returns, as a result of the recently passed COVID-19 relief package. The lookback will also help people qualify for the refundable portion of the Child Tax Credit, which is allowed even if you do not owe any tax.\
There is also a potential Recovery Rebate Credit, which is a special one-time benefit that most people received last year in the form of an Economic Stimulus Payment. But eligible individuals who did not receive their stimulus check or received less than they were eligible for – either the first or the second payment – may be able to claim it when they file their 2020 taxes in 2021 under the Recovery Rebate Credit: Any eligible individual who did not receive the full amount of the stimulus check can claim the Recovery Rebate Credit on a 2020 Form 1040 or Form 1040-SR. Generally, this credit will increase the amount of your tax refund or lower the amount of the tax you owe.
Dunham Tax Professionals is always available to help you navigate these uncertain times, with all of the potential changes to tax code and issued guidelines as they occur. Please contact us, today, to make sure that you receive everything you are entitled to.