The Inside Income Service has up to date its steadily requested questions web page on the 2021 Earned Earnings Tax Credit score, with new info on utilizing prior tax years to calculate the EITC.
In 2021, extra folks with out kids have been in a position to qualify for the EITC, because of a provision within the American Rescue Plan Act. As well as, households can now use pre-pandemic earnings ranges to qualify if it ends in a bigger credit score.
The EITC helps low- to moderate-income staff and households by permitting them to assert a refundable tax credit score to both scale back the quantity of taxes they owe or an added fee to extend a tax refund. The quantity of the credit score can change relying on whether or not a taxpayer has kids or different dependents, is disabled or meets different standards.
Inside Income Service headquarters in Washington, D.C.
Samuel Corum/Bloomberg
The FAQ web page gives particulars on what the EITC is, the way it was expanded for 2021, which taxpayers are eligible, and how one can declare it. On Wednesday, the IRS revised one of many questions on the web page. Query 15 asks, “Can I elect to make use of my 2019 earned earnings to determine my Earned Earnings Tax Credit score for 2021?” The reply is sure. For 2021, eligible taxpayers can select to calculate the EITC utilizing their 2019 earned earnings if it was greater than their 2021 earned earnings, even when they didn’t have any earned earnings in 2021. In sure instances, this selection would lead to a bigger credit score.
“Taxpayers who didn’t file a return for tax 12 months 2020 or 2021 or who didn’t declare the Earned Earnings Tax Credit score on their 2020 or 2021 return as a result of that they had no earned earnings in these years could file an unique or amended return to assert the Earned Earnings Tax Credit score utilizing their 2019 earned earnings, if they’re in any other case eligible to take action,” stated the IRS.
Nonetheless, that’s not true for different years. The IRS famous that taxpayers could not use their 2020 earned earnings to calculate the EITC on their 2021 return.