Information on:
Earned Income Tax Credit and Economic Stimulus Payments
CONTACTS: View a list of free tax assistance sites on the main web page of the Vermont State Treasurer www.VermontTreasurer.gov Vermont Department of Taxes, Taxpayer Information Line: 1-866-828-2865 Internal Revenue Service: Earned Income Tax Credit at www.irs.gov/eitc and Stimulus Payments at www.irs.gov, key word search stimulus payment
The Earned Income Tax Credit: A Powerful Benefit for People Who Work
What is the Earned Income Credit? The EITC is a special tax benefit for working people who earn low or moderate incomes. The credit was created in 1975, but the IRS reports that many eligible taxpayers don’t file for the credit because they are not aware of it. For the 2006 tax year, 36,956 Vermont taxpayers claimed the federal credit worth $58,738,235. The average federal EITC refund was $1,589. There is also a Vermont EITC that allows residents to receive an additional tax credit of 32 percent of the amount the taxpayer receives from the Federal EITC. For example, if a taxpayer was receiving the maximum Federal EITC of $4,716, the State EITC would be approximately $1,509. A taxpayer may claim the extra credit by completing the 2007 Vermont Tax Adjustments and Credits form IN-112. Who can get the EITC and how much is it worth? Generally, a taxpayer may be able to take the credit for tax year 2007 if the taxpayer: • has more than one qualifying child and earns less than $37,783 ($39,783 if married filing jointly); or • has one qualifying child and earns less than $33,241 ($35,241 if married filing jointly) or • does not have a qualifying child and earns less than $12,590 ($14,590 if married filing jointly).
Economic Stimulus Payments: Estimated 130 million Taxpayers May Receive Payments
What is an economic stimulus payment? Under the Economic Stimulus Act of 2008, millions of taxpayers will receive payments beginning in May. The only way to get a payment this year is to file a federal tax return for 2007. This filing requirment should be especially noted by people who do not normally file, including many low-income people and anyone receiving Social Security, certain benefits received from the Department of Veterans Affairs and certain Railroad Retirement benefits. While some high-income filers will not qualify for a stimulus payment, most taxpayers will. You do not need to calculate the amount of the stimulus payment. If you qualify, the IRS will automatically figure it and send it to you. The IRS will also send you a notice showing the amount of your stimulus payment. You do not need to call the IRS or fill out any other special forms. How do I find out if I am eligible? Most people who have to pay taxes in 2007 will qualify. This also includes most people who get tax refunds. Families with children under age 17 generally will qualify for an additional payment of $300 for each qualifying child. Some people who normally owe no taxes will also qualify. This can include low-income workers, those who receive Social Security benefits, or veterans’ disability compensation, pension or survivor’s benefits from the Department of Veterans Affairs in 2007. These people will be eligible to receive a payment of $300 ($600 on a joint return) if they had at least $3,000 of qualifying income. In addition, the stimulus payments will not have any effect on someone’s eligibility for federal benefits such as food stamps, Social Security, and other temporary assistance for needy families. How large is the stimulus payment? The stimulus payments could be as much as $600 for single filers and $1,200 for joint filers, plus additional payments for qualifying children. You will not owe tax on the stimulus payment. However, keep a copy of the IRS letter you receive later this year listing the amount of your payment. In the event you do not qualify for the full amount this year but you do next year, you will need to have the letter as a record of the amount you previously received. Taxpayers with adjusted gross income levels starting at $75,000 for a single filer and $150,000 for those filing jointly will receive smaller or no stimulus payment.