As the tax season approaches, many taxpayers may overlook opportunities for financial relief through valuable tax credits. It’s crucial to recognize that even individuals who do not meet the federal filing requirements might qualify for significant credits that could yield hundreds or thousands of dollars in refunds. This guide demystifies the process indicating the advantages of filing a tax return, regardless of income levels, and highlights the opportunities presented by the Earned Income Tax Credit (EITC) and the Additional Child Tax Credit (ACTC).
Many taxpayers are unaware that filing a tax return can sometimes result in monetary benefits even if they do not earn enough to owe taxes. According to the IRS, submitting a tax return can be a wise financial decision as it enables individuals to tap into favorable credits. Robert Nassau, a law professor at Syracuse University and director of the school’s low-income tax clinic, has witnessed “five-figure refunds” awarded to families claiming both the EITC and ACTC concurrently. This demonstrates the potential financial impact of these credits for low-income households.
Moreover, even individuals whose income falls below the taxable threshold could potentially receive a refund by filing a return, especially when they claim these refundable credits. Nassau articulates the significance of these refunds, noting that for many low-income families, the combined benefits of the EITC and ACTC constitute a critical financial resource, sometimes regarded as their most substantial income windfall of the year.
The EITC is specifically designed to support low- to moderate-income workers, with a potential value of up to $7,830 for families with three or more children for the 2024 tax year. Even in cases where a single or married individual without children falls between the ages of 25 to 64, they may still claim a maximum credit of $632. The beauty of the EITC is that it begins phasing in at the first dollar earned, making it accessible to those who may feel they are too low on the income ladder to benefit from tax credits.
Eligibility hinges on “earned income”—essentially wages obtained from work. For single filers, earned income must be no more than $59,899, whereas married couples filing jointly must not exceed $66,819. Alarmingly, statistics show that approximately 20% of eligible taxpayers neglect to claim the EITC, often due to a lack of awareness. Danny Werfel, the former IRS Commissioner, has pointed out that many individuals may not realize their potential to benefit from these credits.
Furthermore, for families with children, the child tax credit becomes relevant after they earn at least $2,500. Families can claim up to $2,000 per child under the age of 17, while the refundable portion, known as the ACTC, can further augment refunds by as much as $1,700 per child. Understanding these thresholds and requirements is essential in maximizing potential benefits.
An important aspect to remember during tax season is that, by law, the IRS cannot issue refunds for EITC or ACTC claims before mid-February. This policy is designed to combat fraud and ensure a thorough review of claims. However, once this window opens, preparatory measures can help expedite the refund process.
Taxpayers can conveniently track their refunds through the IRS’s “Where’s My Refund?” tool or the IRS2Go app, thereby maintaining transparency and reducing anxiety concerning their tax filings.
Tax season should not be a period marked by uncertainty or disengagement from financial benefits. By understanding the essentials of the EITC and ACTC, taxpayers can navigate their finances more effectively and secure crucial financial support that alleviates economic burdens. The emphasis on filing, even when not required, serves as a reminder that taking proactive steps can yield remarkable results in securing family finances—making it worth every effort.