The Earned Income Tax Credit (EITC) is a tax measure aimed at workers with moderate or low incomes who meet certain requirements. This credit provides a direct reduction in the tax payable or even a cash refund if no taxes are owed.
The amount that can be claimed through the EITC varies depending on the income earned and the family composition. For example, for the 2023 tax year, taxpayers can claim up to $7,430, depending on their filing status and the number of qualifying children they have in their household.
The IRS sets different maximum amounts depending on the number of qualifying children: $600 without children, $3,995 with one child, $6,604 with two children, and up to $7,430 with three or more children.
In addition, there are gross adjusted income (AGI) limits depending on filing status, with a maximum of $17,640 for singles or heads of household and $24,210 for married couples filing a joint return.
An investment income limit of $11,000 also applies in all situations. If the investment income exceeds this limit, the taxpayer does not qualify for the EITC, even if he meets the other income requirements.
The IRS Warns: $1,000 Million in Unclaimed Tax Refund About to Be Lost Forever
The Internal Revenue Service is reminding individuals who didn’t file their tax year 2020 returns that they might qualify for a refund if they file by the May 17 deadline. Over $1 billion in refunds remains unclaimed, according to IRS estimates.
Failing to file incurs no penalty if a refund is due. However, refunds must be claimed within three years of the due date. After this period, the refund statute typically prevents refunds and the application of credits to other tax years.
For 2020 tax returns, the deadline to claim refunds is extended to May 17, 2024, due to COVID-19. The IRS issued legal guidance on claims required by the postponed deadline in Notice 2023-21 on Feb. 27, 2023.
Documents Required for the 2020 Tax Refund
To ensure a smooth filing process and meet the May 17 deadline for 2020 refunds, individuals should gather all necessary documents and forms promptly. Here are some helpful options.
Request Copies of Key Documents: If you’re missing Forms W-2, 1098, 1099, or 5498 for the years 2020, 2021, or 2022, reach out to your employer, bank, or other payers to request copies.
Use Get Transcript Online: If you’ve lost contact with your employer or payers, you can order a free wage and income transcript at IRS.gov using the Get Transcript Online tool. This is often the quickest and easiest option.
Request a Transcript: File Form 4506-T, Request for Transcript of Tax Return, with the IRS to obtain a “wage and income transcript.” This transcript includes data from information returns received by the IRS, such as Forms W-2, 1099, 1098, Form 5498, and IRA contribution information. While this option may take several weeks, it’s a valuable resource if other options aren’t available.
Access Tax Forms: Find tax year 2020 Forms 1040 and 1040-SR, along with instructions, on the IRS.gov Forms, instructions & publications page or by calling toll-free 800-TAX-FORM (800-829-3676).
For those unsure if they need to file a return, resources like the “Do I need to file a tax return?” tool or Publication 17, Your Federal Income Tax (For Individuals), provide guidance and clarity.
