The Earned Income Tax Credit

958 Words Dec 8th, 2014 4 Pages
The Earned Income Tax Credit (EITC) is a federal program that provides low to moderate-income workers, including many who are poor, with extra income through tax refunds. It also encourages low-income parents to go to work by lowering their tax rate and providing a financial bonus for their work effort. Congress originally approved the tax credit in 1975 partly to help offset the burden of social security taxes for families and to provide an incentive to work. When the credit exceeds the amount of taxes owed, it results in a tax refund to those who claim and qualify for it. It’s been especially effective in encouraging single parents, mainly single mothers, to obtain employment. In 2003 alone, this tax credit provided 22 million American families and their children, with $34 billion in cash assistance (Francis 2014). The credit has been expanded several times since its creation, and more than half of the U.S. states and the District of Columbia now have their own supplemental EITCs.
There are four main qualifications needed to receive the credit. First, an individual must have a valid Social Security number. Second, an individual must earn income either from working for someone else or from owning or operating a business. Third, an individual must be a U.S. citizen or resident or the spouse of a U.S. citizen or resident for the entire tax year. Finally, earned income and adjusted gross income must both be below income limits that vary by the number of children in a…
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