SECRETS of the EARNED INCOME CREDIT

Be afraid, be very afraid of the “Earned Income Tax Credit”, (EIC or EITC). The advanced EIC may be taken during the year instead of waiting until you do your taxes.  The regular EIC taken at the end of the year helps to get that big fat refund if you meet certain requirements.

The credit was supposed to be based on the money you had to go out and work for, not sit back and receive like interest, pensions, social security…you get my drift. It is icing on the cake because remember your tax REFUND is just you getting your own money back that you over paid the governments.

The advanced earned income credit may be taken by anyone just tell your employer and if you meet certain requirements they’ll hook you up or down whatever the case may be. If you’re hooked up you won’t owe when you do your taxes, if down, well let’s just say you may be on the tread mill of eternal payment to the IRS like share cropping.  If you take the credit in advance you are saying to the Unc Sammy “Hey Unc, let me borrow againt my refund. I think I’m gonna get the extree mo’ney so fork over that bad baby now.” Think is the operative word here. Many times what you thought was wrong. If you used a large number in box 6 of your W-4, the form that tells your employer how much taxes to take out to pay taxes. So your advance may be higher then you are entitled to.  So when you do your taxes and pay it back YOU WILL OWE (ominous voice here).

Now the regular EIC given when you do your taxes is tricky. It appears that if you make less than the key amount on the work sheet, used to figure the credit, you get an amount based on what’s on the W-2. If you made more then it’s figured on your Adjusted Gross income or AGI. Wages and Income are different in IRS speak. Income is any money that you get. Wages is what are reported on the W-2 form. The AGI is the total of all the money you get that can be taxed. That includes Social Security, Pensions, Interest…hey wait! Isn’t this all unearned income? Be Aware, be aware and you won’t need to be afraid.