5 common tax mistakes that can cost you the EITC (a summary)

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According to the IRS, an estimated 20 to 25% of qualified workers fail to claim the EITC each year. Are you making any of these mistakes on your taxes? It could cost you the EITC. You can click each topic to get more information.

Mistake #1: You didn’t file taxes (because you didn’t need to)

The EITC can only be claimed by filing a tax return but some workers miss out because they don’t earn enough to be required to file taxes.

Let’s be clear, there’s a difference between when you need to file taxes and when you should file taxes.

As a general rule, anyone who had taxes taken out of their wages or could qualify for the EITC and other refundable credits should look into filing their taxes.

Mistake #2: You didn’t think you were eligible

For many people, they might miss out on the EITC because they weren’t eligible last year so they think they aren’t eligible this year.

However, if you had any changes to your family size, income, marital status, take another look. You just might be eligible this year.

Mistake #3: You previously claimed the EITC without being eligible

Never claim the EITC when you’re not supposed to! If the IRS finds that you fraudulently claimed the EITC, you cannot claim EITC for the next 10 years.

For those that hire someone to prepare your taxes, it’s important to have an honest tax preparer. If your tax preparer does anything on your tax return that seems like fraud, run – not walk – far, far away to a more honest one!

Mistake #4: You didn’t take disability rules into consideration

If you have, or your spouse or a child on your tax return has a disability, it could affect your eligibility for the EITC in a number of ways.

Disability can affect your EITC eligibilityDisability Retirement Benefits

The IRS considers disability retirement benefits as earned income until you reach minimum retirement age. In contrast, Social Security Disability Insurance, SSI, or military disability pensions are not considered earned income.

Claiming a disabled child

If you are claiming a child with a disability, there is no age limit as long as the child meets the IRS definition of “permanently and totally disabled”:

  • Not being able to engage in any substantial gainful activity because of a medically determinable physical or mental condition; and
  • A physician must certify the condition has lasted or is expected to last continuously for at least 12 months or to result in death

Mistake #5: You didn’t claim dependents that you could have

Grandparents might be able to claim their grandchildrenGrandparents, uncles, aunts, foster parents, step-parents, and others taking care of children should take notice of who they can claim on their tax return.

For the EITC, the following children might be eligible to be claimed as a dependent:

  • Your son, daughter, adopted child, stepchild, foster child (placed by court or an authorized placement agency) or a descendent of any of them such as your grandchild
  • Brother, sister, half brother, half sister, step brother, step sister or a descendant of any of them such as a niece or nephew

However, make sure that you’re allowed to claim a child as your dependent. If you’re not sure, talk to a talk professional.

Make sure you aren’t making any of these tax mistakes that could cost you up to $5,891 this tax year!

If you need help with your taxes, consider using a free tax clinic where volunteers are trained to help you claim the EITC and other tax credits for you.

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