TRLA Tips: Addressing the Income Gap with the Earned Income Tax Credit This Tax Season
“TRLA Tips” is a series powered by TRLA and its legal team to educate on the topics affecting the communities we serve. This is not a substitute for legal advice and is for educational purposes.
Working-class folks are the foundation of the United States, often needing to maintain multiple jobs in one household to provide financial security for themselves and their families.
While the income gap in this country has continued to widen since the 1980s, yet for the first time in 15 years, in 2022, the U.S. reported a slight decrease in the income gap of 12.63% versus the 13.63% reported in 2021.
Many programs in the country continuously work toward improving the income gap for citizens to improve their financial stability and quality of life.
For the last 18 years, the United States IRS has declared January 26th the annual Earned Income Tax Credit (EITC) Awareness Day, a national effort to educate eligible working-class Americans about the EITC and other credits to consider when filing their taxes.
The EITC and other credits are a valuable resource to many working-class Americans and allow those eligible to receive a tax break, often allowing them to preserve some of their income.
To continue paving the path for a more equitable economy for all, we’ve partnered with TRLA Attorney and Team Manager for the Federal Tax and Texas Taxpayer Assistance Program, Polly Bone. With over two decades of experience in tax law, Bone shares some of the common questions we often receive from TRLA clients regarding the EITC.
Common questions about the Earned Income Tax Credit (EITC) and its requirements.
What children can be claimed to receive the EITC?
PB: To be your qualifying child for the EITC, the child must pass the age, relationship, and residency tests, which include:
Age: At the end of the last year, the child must have been under the age of 18, or the age of 24 if they were a full-time student, or any age if permanently disabled.
Relationship: The child must be your son, daughter, brother, sister, or a descendant of one of those relatives (such as your grandchild or niece). You can also claim a foster child if it is an official placement or a child placed with you for adoption. The IRS is very strict about the relationship. Even if you treat a child as your own, you cannot claim the EITC for the child unless you have the required relationship with them.
Residency: You must have lived in the same household as the child for at least half the year. The household must be in the US.
Can I get the EITC if I don’t have a child?
PB: You may qualify for the credit if your adjusted gross income is below $17,640 (single) or $24,210 (married filing jointly). This credit for working taxpayers without children is only available for those between the ages of 25 and 65. You need to file your federal income tax return to claim the credit.
What if the IRS previously denied or reduced my EITC?
PB: If the IRS denied or reduced the EITC and you have not successfully claimed the credit since then, you must file from 8862 when you file your return. This form can be submitted electronically. However, if the IRS imposed an EITC ban (which is rare), you cannot claim the credit until the ban expires or is removed.
I think I qualified for the EITC a year or two ago, but I didn’t file a tax return for that year. Can I file my return and claim it now?
PB: Yes, you can claim the credit up to 3 years from when the original return was due. You could amend a previously filed return if you qualified for the credit but did not claim it.
The EITC is one of the many ways the U.S. addresses the income gap nationally and in Texas.
As of December 2023, the IRS reports that in Texas, it received over 2 million EITC claims, for which it awarded over $7.1 billion to eligible Texans, about $2,860 awarded per eligible household.
The EITC has been received by over 23 million workers and families at the national level, lifting many folks above the poverty line.
Low-wage work disproportionately affects communities of color and continues the cycle of low generational wealth and racial inequity for many families and single workers.
The credits available by the IRS, especially the EITC, have improved the lives of many communities of color – particularly for women of color (WOC). In 2019, it was reported that a combined 9 million Black, Latina, Native American, and Asian and Pacific Islander woman-identifying folks experienced the benefit of this credit.
This refund will continue to shape the lives of many – allowing taxpayers to save for their future, pay medical bills or rent, utilities, or buy extra groceries for the family.
TRLA’s impact and helpful resources.
Sometimes, tax returns requesting the EITC will be audited by the IRS, making it even more critical to understand your eligible credits.
“We’ve had clients come to TRLA after filing their taxes because the IRS held their refund while they’re being audited,” says Bone. “The rules for claiming the EITC change year over year and make it complicated for taxpayers.”
For audited clients, Bone and her team provide additional proof to the IRS, affirming the client’s credit entitlement and negotiating on their behalf to secure EITC or other credits. If a taxpayer has received a ‘Notice of Deficiency,’ a stage in the audit, TRLA will file in the U.S. Tax Court to preserve the taxpayers’ rights to their refund.
To help prevent errors in claiming this credit, the IRS has created the “EITC Assistant,” an online tool to assist taxpayers in determining their eligible and potential credit. The online platform does not save your information and will not ask for sensitive information, including your social security number or bank account information.
For the most up-to-date information on the EITC refund and other tax programs the IRS has available, we encourage you to visit the IRS website.
If the IRS is questioning your tax return, has denied your EITC, or if you have further questions, you can contact the TRLA’s Texas Taxpayer Assistance Project for assistance by calling (956) 996-8752 to learn how to qualify for legal assistance ahead of this year’s tax season.