Tax Credits Can Boost Refunds!

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EITC Awareness Day: Critical tax credit provides a significant refund boost to millions

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Earned Income Tax Credit – Get it Right – English | Spanish | ASL

WASHINGTON – The Internal Revenue Service and partners across the nation remind taxpayers about the Earned Income Tax Credit today on “EITC Awareness Day” 2021. The IRS and partners nationwide urge people to check to see if they qualify for this important credit.

“This year marks the 15th annual EITC Awareness Day,” said IRS Commissioner Chuck Rettig. “For more than 45 years, this tax credit has been helping hard-working Americans and their families. We want to thank our partners around the country who help us reach out to those low- and moderate-income people who may qualify and not even know about it.”

The IRS earlier announced that it will begin accepting 2020 tax returns on Feb. 12. In the meanwhile, people can file their taxes electronically using IRS Free File or other name-brand software. Once filing season officially opens, the returns will be electronically submitted for processing. The IRS reminds taxpayers that the quickest way to get a tax refund is by filing electronically and choosing direct deposit for their refund.

New look-back rule
Under the COVID-related Tax Relief Act of 2020, taxpayers can use their 2019 earned income to figure their 2020 EITC if their 2019 earned income was more than their 2020 earned income. To qualify for EITC, people must have earned income, so this option may help workers who earned less in 2020, or received unemployment income instead of their regular wages, get bigger tax credits and larger refunds in the coming year.

Also, any Economic Impact Payments received are not taxable or counted as income for purposes of claiming the EITC. Eligible individuals who did not receive the full amounts of both Economic Impact Payments may claim the Recovery Rebate Credit on their 2020 tax return. See IRS.gov/rrc for more information.

Vital refund boost
The EITC is the federal government’s largest refundable federal income tax credit for low- to moderate-income workers. For those who qualify, and if the credit is larger than the amount of tax they owe, they will receive a refund for the difference. While the majority of those eligible claim EITC every year, IRS estimates that one of five eligible taxpayers do not claim the credit.

Taxpayers earning $56,844 or less can see if they qualify using the EITC Assistant tool at www.irs.gov/eitc. The EITC Assistant, available in English and Spanish, helps users determine if they are eligible, have a qualifying child or children and  estimates the amount of the EITC they may get. If an individual doesn’t qualify for the EITC, the Assistant explains why.

Nationwide in 2020, more than 25 million taxpayers received over $62 billion in EITC. The average EITC amount received was $2,461 per return. The EITC is worth as much as $6,660 for a family with three or more children or up to $538 for taxpayers who do not have a qualifying child.

Refunds
By law, the IRS cannot issue refunds before mid-February for tax returns that claim the EITC or the Additional Child Tax Credit (ACTC). The IRS must hold the entire refund − even the portion not associated with EITC or ACTC and the Recovery Rebate Credit if applicable. This helps ensure taxpayers receive the refund they deserve and gives the agency more time to detect and prevent errors and fraud.

‘Where’s My Refund?‘ on IRS.gov and the IRS2Go app will be updated with projected deposit dates for most early EITC/ACTC refund filers by Feb. 22. Therefore, EITC/ACTC filers will not see an update to their refund status for several days after Feb. 15. The IRS expects most EITC or ACTC related refunds to be available in taxpayer bank accounts or on debit cards by the first week of March, if they choose direct deposit and there are no other issues with their tax return.

Workers who can claim the EITC
Workers at risk for overlooking this important credit can include taxpayers:

  • Without children
  • Living in non-traditional families, such as a grandparent raising a grandchild
  • Whose earnings declined or whose marital or parental status changed
  • With limited English language skills
  • Who are members of the armed forces
  • Living in rural areas
  • Who are Native Americans
  • With disabilities or who provide care for a disabled dependent

Life events or changes may make people eligible for certain tax benefits like the EITC. The IRS urges people to use the EITC Assistant to check their eligibility for this valuable credit.

How to claim the EITC
To get the EITC, workers must file a tax return and claim the credit. Eligible taxpayers are urged to claim the credit even if their earnings were below the income requirement to file a tax return. Free tax preparation help is available online and through volunteer organizations.

Those eligible for the EITC have these options:

  • Free File on IRS.gov. Free brand-name tax software is available that leads taxpayers through a question-and-answer format to help prepare the tax return and claim credits and deductions, if they are eligible. Free File also provides online versions of IRS paper forms, an option called Free File Fillable Forms, best suited for taxpayers comfortable preparing their own returns.
  • Free tax preparation sites. EITC-eligible workers can seek free tax preparation at thousands of Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) sites. To locate the nearest site, use the search tool on IRS.gov, the IRS2go smartphone application, or call toll-free 800-906-9887. They should be sure to bring along all required documents and information.
  • Find a trusted tax professional. The IRS also reminds taxpayers that a trusted tax professional can prepare their tax return and provide helpful information and advice. Tips for choosing a return preparer and details about national tax professional groups are available on IRS.gov. EITC recipients should be careful not to be duped by an unscrupulous return preparer.

The IRS reminds taxpayers to be sure they have valid Social Security numbers (SSN) for themselves, their spouse, if filing a joint return, and for each qualifying child claimed for the EITC. The SSNs must be issued before the due date of the return, including extensions. There are special rules for those in the military or those out of the country.

Avoid errors
Taxpayers are responsible for the accuracy of their tax return even if someone else prepares it for them. Since the rules claiming the EITC can be complex, the IRS urges taxpayers to understand all of them. People can find help to make sure they are eligible by visiting a free tax return preparation site, or using Free File software or by using a paid tax professional.

Beware of scams
Be sure to choose a tax preparer wisely. Beware of scams that claim to increase the EITC refund. Scams that create fictitious qualifying children or inflate income levels to get the maximum EITC could leave taxpayers with a penalty.

Visit IRS online
IRS.gov is a valuable first stop to help taxpayers get it right this filing season. Information on other tax credits, such as the Child Tax Credit, is also available.

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IRS Stimulus Update

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Treasury issues millions of second Economic Impact Payments by debit card 

 

WASHINGTON – Starting this week, the Treasury Department and the Internal Revenue Service are sending approximately 8 million second Economic Impact Payments (EIPs) by prepaid debit card.

 

These EIP Cards follow the millions of payments already made by direct deposit and the ongoing mailing of paper checks that are delivering the second round of Economic Impact Payments as rapidly as possible.

 

For those who don’t receive a direct deposit, they should watch their mail for either a paper check or a prepaid debit card. To speed delivery of the payments to reach as many people as soon as possible the Treasury’s Bureau of Fiscal Service is sending payments out by prepaid debit card.

 

IRS and Treasury urge eligible people who don’t receive a direct deposit to watch their mail carefully during this period. The prepaid debit card, called the Economic Impact Payment card, is sponsored by the Bureau of the Fiscal Service and is issued by Treasury’s financial agent, MetaBank®, N.A. The IRS does not determine who receives a prepaid debit card.

 

Taxpayers should note that the form of payment for the second mailed EIP may be different than the first mailed EIP. Some people who received a paper check last time might receive a prepaid debit card this time, and some people who received a prepaid debit card last time may receive a paper check.

 

More information about these cards is available at EIPcard.com.

 

EIP Cards are safe, convenient and secure. EIP Card recipients can make purchases online or in stores anywhere Visa® Debit Cards are accepted. They can get cash from domestic in-network ATMs, transfer funds to a personal bank account and obtain a replacement EIP Card if needed without incurring any fees. They can also check their card balance online, through a mobile app or by phone without incurring fees. The EIP Card provides consumer protections including certain protections against fraud, loss and other errors.

 

EIP Cards are being sent in a white envelope that prominently displays the U.S. Department of the Treasury seal. The EIP Card has the Visa name on the front of the Card and the issuing bank name, MetaBank®, N.A. on the back of the card. Each mailing will include instructions on how to securely activate and use the EIP Card.

 

EIP Debit Card Image

 

EIP Envelope Image

 

EIP Cards are being issued to eligible recipients across all 50 states and the District of Columbia. Residents of the western part of the United States are generally more likely to receive an EIP Card.

 

The swift issuance of this second round of payments follows the successful delivery of more than $270 billion in CARES Act Economic Impact Payments earlier this year. To check the status of a payment, visit IRS.gov/GetMyPayment. For more information about Economic Impact Payments visit IRS.gov/EIP.

Economic Impact Payments on their way, visit IRS.gov instead of calling

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WASHINGTON – The Internal Revenue Service today urged people to visit IRS.gov for the most current information on the second round of Economic Impact Payments rather than calling the agency or their financial institutions or tax software providers. IRS phone assistors do not have additional information beyond what’s available on IRS.gov.

The IRS and the Treasury Department began issuing a second round of Economic Impact Payments, often referred to as stimulus payments, last week.

The direct deposit payments may take several days to post to individual accounts. Some Americans may have seen the direct deposit payments as pending or as provisional payments in their accounts before the scheduled payment date of Jan. 4, 2021, which is the official date funds are available.

Paper checks also began going out and will continue to be sent through January. Some people will be mailed debit cards in January, and the IRS urges people to carefully check their mail. Mailed payments will require more processing and mailing time. Those who reside abroad will have longer wait times for checks as disruptions to air travel and mail delivery in some countries will slow delivery.

The IRS emphasizes that there is no action required by eligible individuals to receive this second payment. The payments are automatic, and people should not contact their financial institutions or the IRS with payment timing questions.

Eligibility
Generally, U.S. citizens and resident aliens who are not eligible to be claimed as a dependent on someone else’s income tax return are eligible for this second payment. Eligible individuals will automatically receive an Economic Impact Payment of up to $600 for individuals or $1,200 for married couples and up to $600 for each qualifying child. Most people who have an adjusted gross income for 2019 of up to $75,000 for individuals and up to $150,000 for married couples filing joint returns and surviving spouses, will receive the full amount of the second payment. For filers with income above those amounts, the payment amount is reduced.

Checking the status of a payment
Starting today, people can check the status of both their first and second payments by using the Get My Payment tool, available in English and Spanish only on IRS.gov.

Payment not received or less than expected? Claim on 2020 tax return
Payments started going out last week and will continue through mid-January. Direct deposit payments are being made first to those that have valid routing and account information on file for direct deposit purposes. Because of the speed at which IRS issued this second round of payments, some payments may have been sent to an account that may be closed or no longer active. By law, the financial institution must return the payment to the IRS, they cannot hold and issue the payment to an individual when the account is no longer active. While the IRS is exploring options to correct these payments, if you have not received your full payment by the time you file your 2020 tax return, you may claim the Recovery Rebate Credit on your tax return.

The credit is figured like the Economic Impact Payment, except that the credit eligibility and the credit amount are based on the 2020 tax year information, including income.

For people who received a partial Economic Impact Payment, they can take the Recovery Rebate Credit for any remaining amount they’re eligible for by completing line 30 of the 2020 Form 1040 or 1040-SR.

Changing bank account or mailing information
The IRS cannot change payment information, including bank account or mailing information. If an eligible taxpayer does not get a payment or it is less than expected, it may be claimed on the 2020 tax return as the Recovery Rebate Credit. Remember, Economic Impact Payments are an advance payment of what will be called the Recovery Rebate Credit on the 2020 Form 1040 or Form 1040-SR.

More information
For more information about Economic Impact Payments and the 2020 Recovery Rebate Credit, visit IRS.gov/eip. Starting next week, people can check the status of their payment at IRS.gov/GetMyPayment. For other COVID-19-related tax relief, visit IRS.gov/Coronavirus.