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More Taxpayers Eligible for Earned Income Tax Credit

Additional North Dakotans may be able to take advantage of the earned income tax credit.

Job layoffs and pay cuts in 2010 mean many taxpayers will be eligible for the earned income tax credit (EITC) for the first time this year, says North Dakota State University Extension Service family economics specialist Debra Pankow.

For the 2009 tax year, 44,136 North Dakotans received earned income tax credits totaling $85 million. The average amount per taxpayer was $1,926. Nationwide, more than 25 million people received a total of nearly $58 billion.

The EITC is a tax credit for those who work part or full time and earn low wages.

“The 2009 American Recovery and Reinvestment Act expanded and changed the EITC, making it accessible to even more taxpayers,” Pankow says. “A tax credit can lower the amount of taxes a taxpayer owes, or it could give them a refund.”

To claim an EITC on your tax return:

  • You must have a valid Social Security number
  • You must have earned income from an employer or self-employment
  • 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 you and your spouse are filing a joint return
  • You are not a qualifying child of another person
  • You can’t file Form 2555 or 2555-EZ, which are related to foreign earned income

Legislation passed in December 2010 also will encourage more taxpayers to take advantage of the EITC, Pankow says.

The legislation simplified and standardized the rules for how the earned income and child tax credits and any tax refunds are treated in determining eligibility for public benefit programs.

The legislation excludes any federal income tax refund from counting as income in determining eligibility or the amount of the benefit for any federally funded public benefit program. The legislation also provides that any money the taxpayer saves does not count against the taxpayer’s resource limits for any federally funded public benefit program for 12 months after the refund is received. These new rules are in effect for 2010 through 2012.

“This should encourage lower-income workers to participate in savings programs without worrying about exceeding resource limits and jeopardizing their eligibility for public benefits,” Pankow says.

For more information on the EITC, visit http://www.irs.gov/individuals/article/0,,id=130102,00.html.


NDSU Agriculture Communication - Jan. 20, 2011

Source:Debra Pankow, (701) 231-8593, debra.pankow@ndsu.edu
Editor:Ellen Crawford, (701) 231-5391, ellen.crawford@ndsu.edu
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