Extension educator reminds taxpayers of missed credits, deductions

University Park, Pa. -- The Earned Income Tax Credit is an important tool for lower-income wage earners to make ends meet. But a family-finance expert in Penn State's College of Agricultural Sciences said many eligible families don't take advantage of the credit.

Created in 1975, the Earned Income Tax Credit is designed to help offset Social Security taxes and provide an incentive for work. It is the federal government's largest benefits program for low-income working families, but studies indicate up to 20 percent of eligible filers don't take advantage of the credit.

Robin Kuleck, Penn State Extension family financial-management educator in Elk County, said the complexity of the tax return filing process may keep some people from realizing that they qualify for the credit.

"If you're a young family, perhaps this is your first year to file income taxes, and you just aren't aware that the credit exists," Kuleck said. "Some people think that the credit is only for families with children when, in fact, childless lower-wage workers between the ages of 25 and 65 may be eligible. So, if you're a young person who's been working for a few years, and finally turn 25, you now may be eligible when you weren't in years past."

Others not taking advantage of the benefits include some higher-income families who previously weren't eligible but might qualify now because of the recent downturn in the economy.

"Some families have seen a decrease in income because of a job loss, a lay-off, an illness or a divorce," she said. "Many grandparents find themselves having to raise grandchildren and perhaps don't realize that they, too, could be eligible to claim the Earned Income Tax Credit."

Kuleck noted that some people who earn less than a certain amount of money aren't required to file a return. But if they don't file, they don't get the Earned Income Credit or any other credits they might qualify for.
 
"It can be confusing because each of us has such a unique set of circumstances and it's not a case of one size fitting all," she said. "Increasingly, with the use of computer-generated tax returns, more and more people will receive the credit."

The new maximum E.I.T. credit is $5,666 for a family with three or more children, and the new income limit is $43,352 for families with three or more children ($48,362 if married filing jointly), with investment income limits and relationship and residency requirements.

Kuleck said tax tips and other consumer financial information are available from Penn State Cooperative Extension's "Your Money Your Taxes" website.

"Extension is funded, in part, through the USDA's National Institute of Food and Agriculture, which includes financial literacy as a priority program," she said. "That program's leaders have partnered with the IRS to promote both the Earned Income Tax Credit and the Volunteer Income Tax Assistance program through Cooperative Extension nationwide.

"Taxpayer education results in measurable impacts that make a difference for low- and moderate-income families by helping them both save hundreds of dollars on tax-preparation costs and receive thousands in tax refunds, and those dollars can help strengthen local economies."

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Last Updated March 21, 2011