Earned Income Tax Credit Flashcards, test questions and answers

Discover flashcards, test exam answers, and assignments to help you learn more about Earned Income Tax Credit and other subjects. Don’t miss the chance to use them for more effective college education. Use our database of questions and answers on Earned Income Tax Credit and get quick solutions for your test.

What is Earned Income Tax Credit?

The Earned Income Tax Credit (EITC) is a federal tax credit for low-income working individuals and families. It was designed to help reduce poverty by providing a financial incentive for people to work. The EITC reduces the amount of taxes owed and can even result in a refund if the amount of the credit is larger than the taxes owed. It affects both federal and state taxes, potentially reducing income tax liability significantly. The EITC program has been around since 1975, but was greatly expanded in 1993 with passage of the Omnibus Budget Reconciliation Act. Since then, it has become one of the nation’s most effective antipoverty programs, reducing poverty among affected families by almost 10%. The program currently provides over $70 billion each year to more than 27 million households across the United States, benefiting those at risk of falling into poverty or who are already living in poverty. In order to qualify for EITC benefits, individuals must meet certain requirements including having earned income from employment or self-employment within a given year; having an adjusted gross income (AGI) below certain thresholds; meeting age requirements; being either U.S citizens or resident aliens for the entire year; and not filing as married filing separately. In addition, parents claiming dependent children must provide that child’s Social Security number on their tax return in order to receive full benefits – though partial benefits may still be available without it in some cases. The exact amount of an individual’s credit depends on factors such as marital status, number of qualifying children claimed, and AGI level – with higher AGIs typically resulting in lower credits due to eligibility phaseouts built into the program structure. So while two different households may have similar incomes and family sizes, they may still see different amounts when it comes time to calculate their EITC benefit due to minor differences in their circumstances (e.g., one family may have slightly higher wages than another). Overall, research shows that this important policy helps improve economic security for millions of American families each year especially those most vulnerable to slipping into poverty making it an essential tool in our fight against inequality and economic insecurity today.