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Tax Benefit May Help Many More In This Tough Year

Courier-Post — Sunday, March 22, 2009

By Eileen Smith

The Earned Income Tax Credit, known as the EITC, was designed to give working poor people a break at tax time.

More than 22 million taxpayers benefited from the EITC on their 2006 taxes, with an average benefit amount of $1,950, the government says. The credit tops out at $5,789 and in most cases does not factor into eligibility for food stamps, Medicaid, low-income housing or other government aid.

According to the Center on Budget and Policy Priorities, the EITC helped to lift 4.4 million low-income Americans out of poverty, including 2.4 million children.

Yet the government estimates up to 25 percent of the taxpayers who could keep more money in their pockets don't apply for the benefit, most likely because they aren't aware that it's available.

But tax planning isn't only for the wealthy. It's important for people of all incomes to make certain they get what they are entitled to under the tax laws.

The EITC has been around since 1975, designed to offset the burden of social security taxes on low- and moderate-income workers and to provide an incentive to work.

This year, people who have never applied for the EITC might be eligible because they lost jobs in 2008, dramatically reducing their earnings.

If you are eligible, resist the temptation to go for a Refund Anticipation Loan or other cash-on-the-spot offer from a commercial tax preparer. If you file electronically, the government will get your refund to you in less than two weeks.

More important, fees involved with a rapid refund can significantly reduce your return, warns the Children's Defense Fund, a non-profit child advocacy foundation, "When money goes to pay for high-interest Refund Anticipation Loans from commercial tax preparers, families and communities lose important resources," says Marian Wright Edelman, CDF president.

The EITC was designed to funnel money to working Americans so they can pay their bills and buy goods and service for their families. "In this economic downturn, both families and our economy need important investments like the Earned Income Tax Credit," Wright Edelman says. "These benefits will provide urgently needed assistance to hard-pressed families who are likely to stimulate our economy by quickly spending the money to meet urgent needs."

KEY POINTS

The maximum amount of income you can earn and still get the EITC has increased. You may be eligible if:

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