The earned income tax credit allows taxpayers who qualify to get back more of the money they paid into taxes. Taxes can be confusing with the calculations, paperwork, and stress of filing them on time. One mistake could cost you this substantial tax break.
We’re here to help you understand what exactly the Illinois earned income tax credit is, how to know if you qualify, and other critical information that may help you this upcoming tax season.
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Working people across the country may benefit from the federal earned income tax credit. Those with moderate or low income must meet specific requirements and must, of course, file a proper tax refund, even if they’re not required to file or don’t owe any taxes. This credit reduces the amount of tax that they owe. This credit is especially important to those working individuals with children, but having a qualifying child is not a requirement.
There are income limits and required documents that you must file to qualify for the earned income tax credit. The IRS may also ask for documentation proving eligibility, so make sure you have all the required documents available.
The IRS may also send you a letter to inform you that you may be eligible for the credit. You may still qualify even if you don’t receive such notice.
The Illinois earned income tax credit benefits those working people of Illinois who have a low-to-moderate income amount. The EIC reduces the tax amount owed and may even result in a refund. Much like the federal EITC, you must meet specific requirements to qualify, even if you don’t typically have to file a refund. The Illinois EIC amount is calculated as a percentage of your federal EITC.
To qualify for the earned income credit, you must meet specific guidelines. These include the following:
There are exceptions to these rules for military members, members of the clergy, those impacted by a national disaster, and those who receive disability benefits. You can find these exceptions on the IRS website.
If you think you qualify for the earned income credit or should have qualified, we can help you file an amended return.
The earned income credit is calculated by using the income guidelines and rules mentioned above. Your adjusted gross income will be compared to your earned income, and if it’s greater, your earned income credit will be calculated with the adjusted gross income and then compared to the amount you would have received with the earned income. The lower of these two numbers will be the amount of your earned income credit.
On Oct. 23, 2020, Illinois released a document with some information related to the Illinois EIC. The document addresses frequently asked questions that residents may have in regard to qualifying and claiming the Illinois EIC. It also addresses any recent changes. While we don’t have a date for when guidelines will be released yet for the 2021 tax year, we expect them to follow the same guidelines as years past. If you file taxes and claim the earned income tax credit, you can expect your tax return to be accepted by mid-February. The IRS will not be required to issue any tax refunds with the EIC until the end of February.
The state of Illinois reviews IRS reports to help find taxpayers who received the federal earned income tax credit but did not file an Illinois tax return and may qualify for the credit. You may receive one or more letters notifying you that you have an unclaimed tax credit or may be eligible for the EIC. You may need to send in additional information, verify your income and expenses, and provide previous tax forms. If you get one of these letters, we can help you determine what it means and what your next steps should be.
Even if you’re skilled in math and finances, having a professional assist you with your taxes is beneficial. It saves you time going through documents, deciding what you do and don’t need to list, as well as what information you need to put on your forms. We have a comprehensive approach and will connect you with one of our knowledgeable advisors to help address your tax questions.
At Pasquesi Sheppard, we work hard to make sure you get the money back that you deserve. We want you to take advantage of all tax incentives, including Illinois’s earned income tax credit. We can help by looking at your past year in detail and preparing future tax returns all year long. This approach allows our clients to stay in a position to avoid auditing and maintain any financial goals they set for themselves.
If you have any further questions about Illinois earned income tax credit or would like to discuss your tax situation with a professional, reach out to us at Pasquesi Sheppard. Our experienced team can save you time, money, and stress this upcoming tax season. We look forward to working with you.