January 30, 2013
If you haven’t tried IRS e-file before, now is the time. Most taxpayers – more than 80 percent – file electronically. The IRS has processed more than 1 billion individual tax returns safely and securely since the nationwide debut of electronic filing in 1990. Fewer people file a paper tax return every year. Here are five good reasons to e-file your tax return:
IRS Tax Tip 2013-01, January 28, 2013 If you received income during 2012, you may need to file a tax return in 2013. The amount of your income, your filing status, your age and the type of income you received will determine whether you’re required to file. Even if you are not required to file a tax return, you may still want to file. You may get a refund if you’ve had too much federal income tax withheld from your pay or qualify for certain tax credits.
You can find income tax filing requirements on IRS.gov. The instructions for Forms 1040, 1040A or 1040EZ also list filing requirements. The Interactive Tax Assistant tool, also available on the IRS website, is another helpful resource. The ITA tool answers many of your tax law questions including whether you need to file a return.
Even if you’ve determined that you don’t need to file a tax return this year, you may still want to file. Here are five reasons why:
Like Share Print FS-2013-1, January 2013
The Earned Income Tax Credit (EITC) is a financial boost for people working hard to make ends meet. Millions of workers may qualify for the first time this year due to changes in their marital, parental or financial status.
The IRS urges workers, self-employed people and farmers earning $50,270 or less in 2012 to see if they qualify by using the EITC Assistant on IRS.gov. To get the credit taxpayers need to file a return and specifically claim the EITC, even if they aren’t required to file.
The EITC is a refundable tax credit. This means taxpayers may get money back, even if they have no tax withheld. Nationwide last year, over 27 million eligible individuals and families received nearly $62 billion in EITC.
Many special rules apply to the EITC, so taxpayers should review the rules carefully, even when paying someone else to prepare their returns. Most people who qualify for the EITC also qualify for free tax preparation through the IRS Free File program, or at a local tax help site staffed by trained community volunteers.
Generally, the EITC has no effect on welfare benefits. In most cases, EITC payments are not used to determine eligibility for Medicaid, Supplemental Security Income (SSI), supplemental nutrition assistance program (food stamps), low-income housing or most Temporary Assistance for Needy Families (TANF) payments. Though unemployment benefits are not earned income, they are taxable income and may affect the amount of EITC.
Credit Limits for Tax-Year 2012
The EITC varies based on income and family size. The table showing credit amounts can be found in the Instruction booklets for Forms 1040, 1040A and 1040EZ and in Publication 596, Earned Income Credit. This includes the expanded benefit for families with three or more children.
Those who qualify for EITC for tax year 2012, can get a credit from:
The EITC provides a financial boost for millions of hard-working Americans. However, even though most federal tax refunds are issued in less than 21 days, many factors can affect how long it may take for taxpayers to get their refunds. It is also possible that a tax return could require additional review and therefore take longer to process. Taxpayers can track the status of their refund with the “Where’s My Refund?” tool available on IRS.gov after the IRS starts processing tax returns on Jan. 30.
Eligibility for EITC
Besides filing a tax return, people must meet various requirements. Some of these requirements apply to everyone. Then there are additional requirements that apply to those who have one or more children, and another set of requirements that apply to people who don’t have a qualifying child.
Rules for every taxpayer:
People who claim the credit, based on having one or more qualifying children, each child must meet the relationship test, age test, residency test and joint return test. Each child must meet all four tests.
Relationship test. The child is the taxpayer’s:
Joint Return test. A qualifying child who files a joint return can only do so to claim a refund with neither the child nor child’s spouse being required to file.
More than one person cannot claim the same qualifying child to claim EITC. If a child meets the rules to be a qualifying child of more than one person, only one person can use that child to claim the EITC. Also, if the child qualifies for both a parent and another person, the other person can only get the credit by having a higher AGI than the parent.
Taxpayers without a qualifying child must meet three additional tests:
Avoid Errors and Seek Accuracy
Even if someone else prepares the tax return, a taxpayer is still responsible for the accuracy the return. Because the EITC is complex, many people claiming it make mistakes. Taxpayers should get help if they are not sure whether they qualify. Common errors include:
The Right Credit Amount for Those Eligible
Some people who claim the EITC either figure it incorrectly or are not eligible. A deliberate error can have lasting impact.
More than half of EITC claims are prepared by tax professionals. To help ensure that only those eligible get the credit and that everyone who is eligible gets the right amount, the IRS requires paid preparers to file Form 8867 with any federal return claiming the EITC. This is the same due diligence checklist that for over a decade preparers were required to use for determining a client’s eligibility and then keep in their records.
Taxpayers should be aware that they are ultimately responsible for all information on their returns, whether choosing self-preparation, seeking volunteer tax assistance or paying a professional to claim the EITC. Beware of scams promising to increase an EITC refund. Creating fictitious qualifying children or inflating income levels to get the maximum EITC are scams that may result in severe penalties. Among other things, a taxpayer could be banned from claiming the credit for up to 10 years. If an EITC claim was reduced or denied after tax year 1996 for any reason other than a mathematical or clerical error, the taxpayer must attach Form 8862, Information To Claim Earned Income Credit After Disallowance, to the next return filed to claim the credit.
How to Claim EITC
Following the late tax law changes made by Congress, the IRS plans to open the 2013 tax filing season and begin processing both paper and e-filed individual income returns on Jan. 30, after updating forms and completing programming and testing of its processing systems. The vast majority of taxpayers who qualify can begin to file EITC claims with their federal tax return starting on Jan. 30, 2013.
To claim the EITC, taxpayers need to file a Form 1040, 1040A or 1040EZ . If a taxpayer is claiming the EITC with a qualifying child, the Schedule EIC must be completed and attached to the tax return. Schedule EIC provides the IRS with information about the qualifying children, including their names, ages, SSNs, relationship to the taxpayer and the amount of time they lived with the taxpayer during the year.
Taxpayers can find more information on claiming EITC on irs.gov/eitc. The EITC Assistant available on irs.gov/eitc or the Instructions for Form 1040, 1040A and 1040EZ can help individuals determine their eligibility. The instructions contain a worksheet and the earned income credit table to help determine the amount of the credit.
IR-2013-10, Jan. 28, 2013
WASHINGTON — As preparations continue for the Jan. 30 opening of the 2013 filing season for most taxpayers, the Internal Revenue Service announced today that processing of tax returns claiming education credits will begin by the middle of February.
Taxpayers using Form 8863, Education Credits, can begin filing their tax returns after the IRS updates its processing systems. Form 8863 is used to claim two higher education credits -- the American Opportunity Tax Credit and the Lifetime Learning Credit.
The IRS emphasized that the delayed start will have no impact on taxpayers claiming other education-related tax benefits, such as the tuition and fees deduction and the student loan interest deduction. People otherwise able to file and claiming these benefits can start filing Jan. 30.
As it does every year, the IRS reviews and tests its systems in advance of the opening of the tax season to protect taxpayers from processing errors and refund delays. The IRS discovered during testing that programming modifications are needed to accurately process Form 8863. Filers who are otherwise able to file but use the Form 8863 will be able to file by mid-February. No action needs to be taken by the taxpayer or their tax professional. Typically through the mid-February period, about 3 million tax returns include Form 8863, less than a quarter of those filed during the year.
The IRS remains on track to open the tax season on Jan. 30 for most taxpayers. The Jan. 30 opening includes people claiming the student loan interest deduction on the Form 1040 series or the higher education tuition or fees on Form 8917, Tuition and Fees Deduction. Forms that will be able to be filed later are listed on IRS.gov.