Irs 1040Ez 2005 Tax Table by kgv20544

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									Make Tax Time Pay!
Promote the Earned Income Credit
and the Child Tax Credit


Presentation by: John Wancheck
Organization: Center on Budget and Policy
                 Priorities www.cbpp.org
Phone:           202-408-1080
Email:          wancheck@cbpp.org
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Many workers can make tax time pay
by claiming tax credits they’ve earned!!

 The Earned Income Credit can mean extra money for
 many families, for example:

     Families raising two children with income between
      $10,750 to $15,000 can get $4,300.

 (Not all workers get this amount, but families can expect,
 on average, over $2,100.)


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Wait — there’s more!

 Some families can get Extra Credit through the
 Child Tax Credit!

    A family could also qualify for a Child Tax Credit worth up to
     $1,000 per child.

    Workers who earn over $10,750 in 2004 can get a refund even
     if they don’t owe income tax, (amount is based on a % of
     their income above $10,750).




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The EIC is our most effective
anti-poverty tool for families!
 In 2002, the EIC lifted 4.9 million
 individuals — including 2.7 million
 children — out of poverty.

  The EIC can turn a $6 per hour job into
   an $8 per hour job.



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The EIC:

   Reduces the tax burden on low-wage
    workers
       offsets income and payroll taxes


   Supplements wages

   Provides a work incentive


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The credits help workers keep working
and care for themselves and their
children.
Workers use their credits to:
 Pay for transportation to the job

 Keep a car in working order

 Cover child care costs

 Help cover medical expenses

 Buy food and other basic needs

 Keep current on rent and utility payments

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How do the credits work?


   The EIC is sent as a refund from the IRS, even if
    the worker earns too little to owe income taxes.

   The CTC is designed to reduce income tax, but it
    can also provide an IRS refund for many low-
    income families who don’t owe income taxes.

   Some families are eligible for both credits.

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Here’s how it can really add up!

  Mary earned $18,000 in 2004 and has
  three dependent children under age 17.
  She owes no income tax. She gets an
  EIC worth $3,472. She is also eligible
  to receive a CTC refund of $1,088.
  Together they add up to a total tax
  refund of $4,560!



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Who is eligible?



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Workers eligible for the EIC include:
  Full-time or part-time workers, including self-employed
   workers
  Workers who also receive public benefits
  Single or married workers
  Workers raising a ―qualified child‖ living in their home
   (Very low-income workers do not have to have a
   ―qualifying child.‖)
  Individuals receiving employer-paid disability
   benefits
  Immigrants who are legally authorized to work




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How much can eligible workers earn?
   A worker raising one child, who earns less than $30,338
    in 2004 can get up to $2,604.

   A worker raising two or more children who earns less than $34,458
    in 2004 can get up to $4,300.

   A worker not raising children, who is between the ages of 25 and 64,
    and earns less than $11,490 in 2004 can get up to $390.

    (Income limits for married workers are $1,000 higher than these amounts.)

   Investment income cannot exceed $2,650.




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Who qualifies for the Child Tax Credit?

   Workers who earn more than $10,750 in
    2004 and claim a child under age 17 as a
    dependent

   Non-custodial parents.

   Immigrant workers with ITINs.


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Earned income: What counts?

   Wages, salaries, and tips
   Net earnings from self-employment
   Employer-paid disability benefits
   Union strike benefits
   Military combat pay




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Definition of a “qualifying child”
For the EIC:
   Child can be a son, daughter, grandchild, stepchild,
    adopted child, brother, sister, stepbrother, stepsister
    (or their descendents) or foster children placed by a
    government or private agency

   Child must have lived with the worker for more than
    half the year

   Child must be under 19 or under 24 if a full-
    time student or any age if totally and
    permanently disabled

(If you are the qualifying child of another person, you
   cannot claim the EIC yourself.)
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Definition of a “qualifying child”
For the CTC:
   Child can be a son, daughter, grandchild, stepchild, adopted
    child, brother, sister, stepbrother, stepsister (or their
    descendents) or foster children placed by a government or
    private agency — same as EIC

   Child must be under age 17 — even children
    with disabilities
   Child must be claimed as a dependent on the worker’s tax
    return

   Child does not have to live with the worker



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Rules for immigrant workers
   Immigrant workers can get the EIC:
       must meet the income requirements
       child must live with the worker in the U.S. for more than half
        the year
       worker, spouse and child must each have an SSN that
        authorizes work

   Immigrant workers can get the CTC:
       must meet the income requirements
       child must live in the U.S. and be claimed as the worker’s
        dependent
       worker, spouse and child must have either an SSN or an
        Individual Taxpayer ID Number (ITIN)


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Want to get the most out of every
paycheck?
   Workers raising children can get the Advance
    EIC by filing a W-5 with their employer.

   Part of the EIC is added to each paycheck – for
    workers paid on a bi-weekly basis, as much as
    $118 per month extra take-home pay!

   Workers can get year-end refund too!


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Workers should not choose the Advance
EIC if they:
   Hold more than one job
   Have a working spouse, unless both
    spouses take the Advance EIC
   Expect a big increase in income during the
    year (new job, marriage to someone who
    also works)
   Could end up not eligible for the EIC and
    have to pay money back to the IRS


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Workers cannot get the Advance EIC if
they:

   Do not have qualifying children

   Get paid day by day

   Do not have Social Security and Medicare
    taxes withheld from their pay


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EIC Benefits for Tax Year 2004
at Various Income Levels
This is not a tax table. Do not use this table to complete income tax returns.

2004 earned             EIC for single           EIC for single           EIC for single
income                  workers not              workers                  workers
                        raising a child          raising one              raising two or
                                                 child                    more children
$ 5,000                 $384                     $1,709                   $2,010
$ 8,000                 $265                     $2,604                   $3,210
$10,000                 $112                     $2,604                   $4,010
$12,000                 $0                       $2,604                   $4,300
$14,000                 $0                       $2,604                   $4,300
$16,000                 $0                       $2,287                   $3,882
$20,000                 $0                       $1,648                   $3,040
                                                                                       20
                                                                                       20
                   The Federal Earned Income
                   Tax Credit in Tax Year 2004
                $5,000


                $4,000                                              Maximum benefit
Credit Amount




                                                                         $4,300
                $3,000


                $2,000
                                        Maximum benefit
                                        Maximum benefit
                $1,000                       $2,604
                                            $2,604

                    $0
                         $0    $5,000   $10,000   $15,000   $20,000 $25,000   $30,000   $35,000

                              One child, single parent        Two or more children
                                        the
   Note: Married couples with income inphaseoutrange qualify for a higher credit than single
   parents— shown by dashed lines.
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How do you claim the credits?
   There’s no ―catch‖— but you must file a tax return!

   Families must file either Form 1040 or 1040A — not
    the 1040EZ — and they must attach Schedule EIC
    for the EIC and Form 8812 for the CTC.

   Workers not raising children can file any form for the
    EIC — 1040EZ is OK.

   Families raising children can get some of their EIC in
    advance in their regular paycheck — up to about $59
    in each bi-weekly check — by filing a W-5 with their
    employer.

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The high cost of commercial tax
preparation

 When it’s time to file a tax return, many
 workers seek help from a commercial tax
 preparer.
    70 percent of EIC claimants use
     commercial tax preparers.

    Average fees range from $85 - $120 for
     e-filing.

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Why would I not want a “quick
refund?”
    Refund anticipation loans are risky
  Very high-interest loans (can be over 180
   percent interest rate)

  Can be an additional $80 fee or more

  Some preparers charge a percentage of the
   EIC refund, driving fees even higher

  No guarantee refund will equal the loan
   amount
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Promote free tax preparation
assistance
   Provide alternative to preparation and loan fees
       Volunteer Income Tax Assistance (VITA) provides free tax
        filing help for low-income workers at community sites.


   Expand and improve VITA
       Recruit community volunteers to be trained by IRS.
       Community groups needed to host additional sites; more
        accessible sites.
       More sites needed that can provide e-filing (IRS will provide
        software!).


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Why is outreach needed?

   The eligible population is ever-changing,
    especially in a changing economy:
       Workers not eligible in the past who lose their jobs
        mid-year could become eligible.
       Workers just entering labor force may not know
        about the credits.
   Some groups are at greater risk of
    missing out on the tax credits.


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Who is at risk of missing out on the
EIC and CTC?

   Workers not required to file returns
       $15,900 for a couple; $10,250 for head of
        household; $7,950 for a single filer (2004)
   New employees. Employees making the
    transition from welfare to work
   New parents – including foster and adoptive
    parents
   Divorced or separated custodial parents

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Outreach Partnerships

   Build partnerships to connect with eligible
    families and individuals:
       Nonprofit health and human services providers
       Community organizations and institutions
       Faith-based groups
       Civic/service organizations
       Labor unions
       State and local government agencies (esp. public
        benefits)
       Employers and local businesses
       Media
       IRS

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   Make special efforts to:
       Demonstrate how the credits can help workers meet
        other goals (paying back bills, transportation to work,
        future homeownership)
       Address language and literacy concerns
       Integrate outreach activities with partners’ routine
        activities
       Increase the availability of free tax filing assistance
        and improve service
       Consider a comprehensive approach to helping
        families obtain benefits they need


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              Make Tax Time Pay!
                2005 EIC & CTC
             Community Outreach Kit


Updated for 2005 by the Center on Budget and Policy Priorities.
Posters, flyers, fact sheets on EIC & CTC rules and strategies
for community tax credit outreach efforts.

To order your free copy: Email eickit@cbpp.org
                         or call us at 202-408-1080
See the 2004 Kit at www.cbpp.org/eic2004
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