Credit When It�s Due
The earned income tax credit (EITC) means extra cash in the pockets
of many workers. But some who are eligible for the credit don�t get it.
"Because to get the EITC, people must file a tax return," said John
Dalrymple, IRS Chief Operations Officer. "Some workers earn so little,
they legally don�t have to file," Dalrymple explained. "By not filing,
they�re missing out on money they�re entitled to receive from a few dollars
to as much as $3,756."
The EITC is a special tax break for lower-income workers. It�s a
refundable credit that reduces the tax some workers owe and may give them
refunds. A unique feature of the credit is that people can get it even
if they don�t owe any federal tax or they had no tax taken out of their
The credit is based on the amount of income earned and the number
of qualifying children the workers have. A qualifying child can be a son
or daughter, adopted child, grandchild, or stepchild who lives with the
taxpayer in the United States for more than half the year and who meets
certain age requirements. There are special rules for foster children.
Workers without a qualifying child may also get a credit of up to $341.
To qualify, workers must have earned income from wages or self-employment.
Their 1998 adjusted gross income (AGI) must be less than $30,095 if they
had two or more qualifying children or less than $26,473 if they had only
one qualifying child. A worker without a qualifying child must have AGI
of less than $10,030, be at least age 25 and under 65, not be claimed as
a dependent on anyone else�s return and must have lived in the United States
for more than half the year.
Workers claiming the credit cannot have more than $2,300 in investment
income, such as interest or dividends, and cannot be a qualifying child
of someone else. Special rules apply to U.S. military personnel, nonresident
aliens and divorced couples who have dependents.
Certain workers may be able to get extra money added to their paychecks
throughout the year with the advance EITC. Details are on Form W-5, "Earned
Income Credit Advance Payment Certificate," which they must fill out and
give to their employers.
While the IRS wants people who are eligible for the credit to claim
it, they are also cautioning taxpayers who claim the credit to be certain
they qualify. "Due to new tax legislation, people who aren�t eligible for
the credit, but claim it anyway, will have to meet additional requirements
if they want to claim the credit in the future. In some cases, they may
not be able to claim the credit for a number of years," said Dalrymple.
For more information on the EITC, call 1-800-829-3676 and order free
Publication 596, Earned Income
Credit (in English or Spanish), and Form
W-5, or download here.
Refunds With Direct Deposit
Expecting a tax refund? Get it faster by directly depositing it into
a bank account.
Depositing a refund into a checking or savings account is more secure
because there�s no check to get lost. And it takes the U.S. Treasury less
time than issuing a paper check. So people can get their refunds faster
without making a special trip to the bank.
Direct Deposit is available for all individuals, regardless of how
they file their returns - by phone, computer or mail. Those who mail the
IRS a paper return can fill in the "Refund" section.
People should ask their financial institutions if they accept Direct
Deposit, including joint refunds into individual accounts. They can also
verify the correct routing and account numbers.
Although Direct Deposit can be used in most situations, it can�t
be used when filing a prior year�s return. Also, Direct Deposit will not
occur if the name on the tax return and bank account don�t match. Direct
deposits of refunds won�t go into foreign bank accounts, either. If, for
some reason, the refund can�t be directly deposited into a taxpayer�s account,
the U.S. Treasury will send a check instead.
Check Tax Returns
A couple of misplaced numbers or an incorrect name can stall the
processing of a tax return and any expected refund. It's worth the time
to double check every tax form and schedule before sending it off to the
Internal Revenue Service. Here's a list of things to look out for.
l Numbers that are transposed, left out or totaled incorrectly.
2 Incorrect or missing Social Security numbers (SSNs). All dependents
must have one (use Form SS-5 to apply). SSNs won't be preprinted on the
tax package label, so people must be sure to write theirs on the return.
3 Incorrect or missing employer identification numbers (EINs) for
employers and sole proprietors.
4 Names that have changed because of marriage or divorce. (Notify
the Social Security Administration (SSA) immediately after a change.)
5 Aliens who do not qualify for SSNs must get IRS-issued individual
taxpayer identification numbers (ITINs) (use Form
W-7 to apply).
6 People in the process of a domestic adoption may need an adoption
taxpayer identification number (ATIN) for the child (use Form
W-7A to apply).
Don't forget to use the label and envelope from the tax package.
Doing so can reduce the chance of misrouted mail or refunds because of
hard-to-read handwriting. Make sure the envelope has enough postage and
complete addresses, both return and IRS, so it won't go astray in the mail.
Remember to sign and date the return. If taxes are due, make the check
payable to the United States Treasury and don't staple it to the return.
To get IRS Form W-7 and
Form W-7A, call 1-800-829-3676,
or download here. To get SSA Form SS-5, call 1-800-772-1213.
When Names Change
Names change for different reasons, such as marriage or divorce.
People should notify the Social Security Administration (SSA) when their
names change because names and Social Security numbers on tax returns must
match those the SSA has on record. If they don't match, federal tax refunds
could be delayed or the Internal Revenue Service may contact those affected
to straighten out the mismatch.
General Information | 1998 Tax Year Archives | Tax Help Archives | Home