Don’t overlook tax credit

The IRS is making a big push this year to make sure certain taxpayers know they can take the earned income tax credit, a benefit for lower income workers and working families that goes unclaimed by up to 25 percent of those who are eligible.

The EITC is intended to offset a portion of Social Security and Medicare taxes, thus boosting take-home income in low-wage jobs and providing an incentive to work. It’s a “refundable” credit, meaning that after it is figured against your tax liability, the IRS sends you any money you’re due.

For 2007 tax returns, the maximum credit is worth up to $4,716 for people with two or more qualifying children, though it’s also available to some taxpayers without children.

“For families eligible for the maximum it’s almost a quarter of their income,” said David R. Williams, IRS director of Electronic Tax Administration and Refundable Credits. “That is such a significant amount of money. It can mean so much for a family.”

But the rules and qualifications can be confusing. People overlook the credit because they believe it’s too complicated, they don’t have children or their income is so low they don’t have a legal obligation to file taxes. Many aren’t native English speakers.

As many as 5 million people are probably eligible for the credit but are not taking it, the IRS says.

To reach out to them, the IRS will have “EITC Awareness Day” on Jan. 31 — about the time people get their W-2 forms from employers and start thinking about income taxes. The agency also works with 12,000 volunteer tax preparation sites for people who need help with this and other benefits.

The credit is calculated on IRS worksheets, available in English and Spanish. There is also an English-Spanish “EITC Assistant” tool on the IRS Web site at http://www.irs.gov. Many EITC filers can file for free online using the IRS Free File partners, providing they access those partners from the IRS Web site. The agency is also reaching out to Native Americans, people with disabilities and those in rural areas who may be eligible for the credit.

For tax year 2006, 22.4 million taxpayers received $43.7 billion as of last November. But only about 75 percent of those eligible claim this benefit, the agency says.