How Does Earned Income Credit Work ?

Question

Does a person who makes little or no money eventually get a refund becuase of this ?

Answer 1

EIC is a government program to give money to low income workers, to encourage people to work even if they don't make a lot. If you don't have "earned income", that is income from a job, you don't qualify. Payments can range from $1 to several thousand dollars. The amount depends on your income, your filing status, and whether or not you have children and if so whether you have just one child or more than one.

For someone, or a couple filing jointly, with no children last year, the maximum EIC amount was $412, and income limits were around $12K if you are single, $14K for a joint return.

With children, income limits were around $36K if you're single, $38K on a joint return, and the maximum EIC was over $4500 with two or more children, over $2700 with one.

The maximum amount goes to people with incomes around the middle of the eligible income range. On either the high or low end of the range, the EIC is much smaller.

Answer 2

Actually, a person who makes NO income will not benefit from Earned Income Credit. It is for taxpayers that are low income and helps give them a boost---you will not get a refund if you have no earned income during the year.

Here is a link that will give you specific guidelines to see if you qualify for Earned Income Credit:
http://www.irs.gov/irs/article/0,,id=134524,00.html

Also, you actually have to file a return to see if you qualify for this credit in order to claim it. It is not a refund that will eventually come to you if you do not. Several years ago the IRS did give out a refund even if you did not file---it was a certain amount of money based on if you had claimed the Child Tax Credit the year before on your return. In that case, taxpayers received a check in the mail and did not have to file anything--it was really a "back to school" boost for a lot of families.

So, you definitely need to file a return and fill out a Earned Income Credit worksheet to see if you do qualify for a refund.

Answer 3

Earned Income Credit (EIC) is an entitlement program to subsidize the income of low income wage earners. If your income falls in the proper range you will get a credit similar to withholding only you never contributed. For example in 2006 if you were married , had 2 children and made $16,000 of earned income you would get a credit of $4,536. Your tax liability would have be zero (0) and the $4,536 would be refunded to you along with some additional child tax credit of something between $1,000 and $2,000. In other words the government has just give you some $6,000 in tax free money.