Famicos Foundation and the EITC Coalition

What it is? How can it benefit your family? How can you know?

Understanding The Importance of Filing

In the world of income tax filing the various types of income we receive throughout each year may qualify us to receive what is referred to as a tax break. It is better defined as a reduction in the amount of tax we are expected to pay on certain income(s) we have received during the year. And in the course of filing the income circumstances may sometimes contribute to a refund. 

The U.S. Treasury Department provides a service to allow collection of the tax. The work performed by personnel in that department, performed on our behalf; is better known as the Internal Revenue Service.

There are various adjustments and credits found within the Internal Revenue Code of the Treasury that are only reconciled as part of income tax preparation.

Once income is entered and combined it gets finalized for the calculation of taxes owed by use of any adjustments or deductions. An example of an income adjustment is a reduction received for interest paid during the year on repayment of a student loan. This is called student loan interest. Another is for contributions you make independent of an employer into your retirement account. Further, an example of an income deduction is the standard deduction written into law based upon your income filing status. These help to lower your income received providing less income for which to apply the tax computation.

Enter The Earned Income Tax Credit.

Next up is the determination of the tax, and how it can be lowered or considered paid in full. The tax is lowered by the application of laws that provide credits to the taxpayer if they meet the criteria within the law.

Some credits are referred to as non-refundable credits which are tax credits and used to reduce the amount of the tax obligation, and then there are various refundable credits which supply the taxpayer with an amount generated as a refund which can also add to the overpayment of taxes that the taxpayer has supplied by way of employment dollars throughout the year via their income

One such reduction that shows up in the form of a credit, and has become well known is the Earned Income Tax Credit. Many refer to it in short as the EIC.

The Earned Income Tax Credit is governed by laws within the Internal Revenue Code (IRC) which determine both a taxpayer’s ability to receive this credit, and the amount which may be received if one does qualify.

Various things impact a taxpayer’s ability to receive this credit and the amount which can be received. 

1.) there must be a source of earned income, 

2.) household size

3.) the age of the tax payer

 It is an earned income credit therefore there must be actual earned income in order to make the initial decision. The amount of income does impact the amount of the credit  Income earned from working wages or self-employment are two such types of income and the Earned Income Tax Credit is the one sought out on behalf of taxpayers we serve. (hyperlink to EIC schedule).

Next is the household size and almost lastly is the amount of the actual earned

We have provided a link to a couple of common sense resources allowing you to see for yourself how the laws are applied when filing taxes