This story is about the U.S. tax system. It deals with the earned-income credit.
The earned-income credit offers a bonus of up to $910 a year to low-income working families with children.
The maximum credit of $910 is available only to families with income between $6,500 and $10,250, but some benefit can be claimed until income reaches $19,340.
A qualifying worker can receive the benefit in advance as part of his or her weekly paycheck.
Workers may qualify if they meet all of these tests:
- Had at least one child who lived with applying worker more than half of the year, or for the entire year if the worker files as a qualifying widow or widower.
- Had earned income—wages, tips or self-
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employment earnings—of less than $19,340 last year.
- Had adjusted gross income—total income subject to tax minus alimony, employee business expenses and similar adjustments—under $19,340.
- File a joint return, as head of household or qualifying widow or widower with dependent child.
There are different rules applying to each of the three filing statuses. IRS Publication 596, which is free, has details.
You may calculate the credit yourself by using the special work sheet and the earned-income-credit table in your tax instructions. Or the IRS will figure the credit for you. The instructions are on page 31 of the 1040A instructions or page 16 of the 1040 booklet.
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Exercise 25.4
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2007 McGraw-Hill Higher Education