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Free Tax Return Advice How to Get a Tax Refund… Even if You Did
not Pay Taxes!
(Jan 2012 – report provided by Paul Mladjenovic along with supporting documentation from the
IRS)
Yes…you read that right! It is possible to get a refund even if you didn’t pay taxes.
Make believe that you are a home based entrepreneur and you made some money in your first year
of doing work as a self-employed person. It is typical for many just starting out in their
own business to either lose money or make a little money. Even the most successful entrepreneurs
on the planet did that in the beginning.
If you met the IRS’s criteria, you could end up not only not paying taxes but additionally
getting a refund too…of taxes that you never paid! How can you do that?
It is done through a program administered by the IRS called the “Earned Income Tax
Credit” (EITC). Qualifying is not that difficult….many low-income taxpayers have received it.
A copy of the form (Form EIC) and full details (Publication 596) are included in your Tax
Winner resources.
Below is the actual report straight from the IRS which gives you a brief summary about
it and answers basic questions on the EIC:
Free Tax Return Advice - - - - - - - - - - - - - - - - - - - - - - - - -
Earned Income Credit You may qualify for the Earned Income Tax
Credit, or EITC, if you worked last year, but did not earn a lot of money.
EITC is a refundable tax credit meaning you could qualify for a tax refund even if you
did not have federal income tax withheld. To qualify for the credit your Adjusted Gross
Income (AGI) must be below a certain amount and you must:
• Have a valid Social Security Number (if you are filing a joint return, your spouse
also must have a valid Social Security Number) • Have earned income from employment or
from self-employment • Have a filing status other than married,
filing separately • 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 • Not be a qualifying child of another person
(if you are filing a joint return, your spouse also cannot be a qualifying child of another
person) • Not have investment income over a certain
amount • Not file Form 2555 or 2555-EZ (related
to foreign earned income), and • Have a qualifying child who meets 4 tests
(the Age, Relationship, Residency and Joint Return tests) OR:
o be age 25 but under 65 at the end of the year
o live in the United States for more than half the year, and
o not qualify as a dependent of another person If you qualify, the amount of your EITC will
depend on your filing status, whether you have children, the number of children you
have, and the amount of your wages and income last year.
For more information or to see if you qualify, go to the EITC Home Page on IRS.gov or call
800-829-3676 and request Publication 596, Earned Income Credit. (Page Last Reviewed
or Updated: December 22, 2011)
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Q1. What is the Earned Income Tax Credit (EITC)?
A1. The earned income credit (EITC) is a tax credit for certain people who work and have
low wages. 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.
________________________________________ Q2. Who can claim the credit?
A2. 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: o be age 25 but under 65 at the end of the
year, o live in the United States for more than
half the year, and o not qualify as a dependent of another person
• Cannot file Form 2555 or 2555-EZ (related to foreign earn income)
• You must meet these EITC Income Limits, Maximum Credit Amounts and Tax Law Updates
________________________________________ Q3. What if I was denied the EITC last year?
A3. If your EITC for any year after 1996 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. You
must also qualify to claim the EIC by meeting all the rules described in Publication 596.
However, do not file Form 8862 if either (1) or (2) below is true.
1. After your EITC was reduced or disallowed in the earlier year:
• You filed Form 8862 (or other documents) and your EITC was then allowed, and
• Your EITC has not been reduced or disallowed again for any reason other than a math or
clerical error. 2. You are taking the EITC without a qualifying
child and the only reason your EITC was reduced or disallowed in the earlier year was because
the IRS determined that a child listed on Schedule EITC was not your qualifying child.
Also, do not file Form 8862 or take the EITC for:
• 2 years after there was a final determination that your EITC was reduced or disallowed due
to reckless or intentional disregard of the EITC rules, or
• 10 years after there was a final determination that your EITC was reduced or disallowed due
to fraud. ________________________________________
Q4. Who is a qualifying child? A4. Your child is a qualifying child if your
child meets all of the following tests: 1. Relationship
2. Age 3. ResidencyJoint Return
Relationship To be your qualifying child, a child must
be your: • Son, daughter, stepchild, eligible foster
child, adopted 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).
Definitions to clarify the relationship test. 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. 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.
Age Your child must be:
1. Under age 19 at the end of the year and younger than you or your spouse if you file
a joint return, 2. A full-time student under age 24 at the
end of the year and younger than you or your spouse if you file a joint return, or
3. Permanently and totally disabled at any time during the year, regardless of age.
Residency Test Your child must have lived with you in the
United States for more than half of the year. See Publications 596 and 501 for more details
________________________________________ Q5. Who is an eligible foster child?
A5. An eligible foster child is an individual who is placed with you by an authorized placement
agency or by judgment, decree, or other order of any court of competent jurisdiction.
________________________________________ Q6. What is Earned Income?
A6. Earned income includes all the taxable income and wages you get from working.
There are two ways to get earned income: 1. You work for someone who pays you, or;
2. You work in a business you own. Taxable earned income also includes:
• Wages, salaries, and tips; • Union strike benefits;
• Long-term disability benefits received prior to minimum retirement age;
• Net earnings from self-employment. Combat Pay
Nontaxable combat pay election. You can elect to have your nontaxable combat pay included
in earned income for the earned income credit. The amount of your nontaxable combat pay should
be shown on your Form W-2, in box 12, with code Q.
Free Tax Return Advice ________________________________________
Q7. How do I figure my credit? A7. After you know you qualify for the EITC,
you need to know how to figure the amount of the credit. You have two choices of how
to figure the credit: 1. Have the IRS figure the credit for you.
If you would like the IRS to do this, see Publication 596, or
2. Figure the credit yourself. To do this you must use the Earned Income Credit Worksheet
(EIC Worksheet) in the instruction booklet for Form 1040, Form 1040A, or Form 1040EZ,
and the Earned Income Credit (EIC) Table in the instruction booklet, or use the EITC Assistant
Tool online. For more information, see Chapter 4, Figuring
and Claiming the EITC, in Publication 596. ________________________________________
Q8. If I get the Advance EITC or AEITC do I have to file a tax return?
A8. Yes. If you receive the Advance EITC or AEITC, you must file a tax return. The Form
W-2 provided by your employer will show the amount of the AEITC you received. This amount
must be reported on your tax return. You will also be able to claim any additional credit
to which you may be entitled. If you received advance payments of EITC,
you must file Form 1040 or Form 1040A to report the payments. Your Form W-2, box 9, will show
the amount you received. Note: The Education Jobs and Medicaid Assistance Act of 2010 signed
into law August 10, 2010 repealed the Advance EITC or AEITC. It will not be available to
workers after December 31, 2010. ________________________________________
Q9. What if I am prohibited from claiming the EITC for a period of years?
A9. If your EITC for any year after 1996 was denied and it was determined that your error
was due to reckless or intentional disregard of the EITC rules, then you cannot claim the
EITC for the next 2 years. If your error was due to fraud, then you cannot claim the EITC
for the next 10 years. The date on which your EITC was denied and the date on which you
file your tax return affects the years for which you are prohibited from claiming the
EITC. >
________________________________________ Q10. Where can I get more information?
A10. Find out if you are eligible for the Earned Income Tax Credit (EITC) by answering
some questions and providing basic income information in our EITC Assistant application.
Click here for the English Version of the EITC Assistant or o haga click aqui para seleccionar
la Version en Espanol del Asistente EITC. • Additional Publications and Tools
• EITC Income Limits, Maximum Credit Amounts and Tax Law Updates
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The above text was straight from the IRS and if you qualify for the EIC then by all means
take advantage of it. One time I did a tax return for a home based business and she was
worried that she might owe taxes. After taking all the home business deductions that she
was entitled too, her net earned income was lowered to the point that not only did she
not owe taxes but she also qualified for taxes that she never paid. She got a nice tax refund…even
though she was worried that she might owe taxes!
Please ask your tax preparer if you qualify or go to the IRS website for more details.
Do everything you can…legally…to keep more of the fruits of your labor!
Have a great tax year! Regards, Paul Mladjenovic.
Free Tax Return Advice