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Many Hurricane Victims Qualify for Earned Income Tax Credit

Tax planning

The IRS is urging victims of last year’s hurricanes, especially those who lived in areas affected by Hurricanes Harvey, Irma and Maria, to see if they qualify for the Earned Income Tax Credit (EITC). According to the IRS, many people whose incomes dropped in 2017 may be eligible to choose a special option for figuring the EITC, a credit for low- and moderate-income workers and families.

A special computation method, available only to people who lived in one of the hurricane disaster areas during 2017, may enable them to claim the EITC or claim a larger than usual credit. Under this method, taxpayers whose incomes dropped in 2017 can choose to figure the credit using their 2016 earned income rather than their 2017 earned income. Eligible taxpayers should figure the credit both ways -- the regular way using 2017 earned income and this special way using 2016 earned income -- to see which yields the larger EITC. For more information and special instructions on how to report, see the instructions for Form 1040, Line 66, and Publication 976, available on IRS.gov.

The EITC helps working people who don't earn a lot ($53,930 or less for 2017) and meet other eligibility requirements. Because it’s a refundable credit, those who qualify and claim it could pay less federal tax, pay no tax or even get a refund.

EITC can mean up to a $6,318 refund for working families with qualifying children. Actual credit amounts vary based on income, family size and other factors. Workers without a qualifying child with incomes below $20,600 could also be eligible for a smaller credit of up to $510. On average, EITC adds $2,445 to refunds.

To qualify for EITC, an eligible taxpayer must meet basic rules and have earned income from working for someone, being self-employed or running a business or farm. This includes home-based businesses, the sharing economy and employment in the service, construction and agriculture industries. In addition, certain disability payments may qualify as earned income for EITC purposes. The EITC Assistant, available on IRS.gov, can help taxpayers determine eligibility and estimate the amount of their credit.

To get the credit, people must file a tax return, even if they owe no tax and even if they normally aren’t required to file. The fastest and easiest way to do so is by filing electronically, whether through a qualified tax professional; using free community tax help sites; or self-preparing with IRS Free File.

By law the IRS cannot issue refunds before mid-February for tax returns that claim the EITC or the Additional Child Tax Credit (ACTC). The IRS must hold the entire refund — even the portion not associated with EITC or ACTC. This change helps ensure taxpayers receive the refund they deserve and gives the agency more time to detect and prevent errors and fraud.

The IRS expects the earliest EITC/ACTC related refunds to be in taxpayer bank accounts or debit cards starting Feb. 27, 2018, if they chose direct deposit and there are no issues with the tax return.

Source: IRS

Alfredo Gaxiola has worked on numerous IRS problem cases and has successfully settled with the IRS to release liens on houses, bank accounts and wages and, if needed, setting a payment installment plan that is not burdensome for the client. He has conducted appeals before the U.S. Tax Court and obtained favorable resolutions in reducing the tax debt of his clients. Mr. Gaxiola served as Treasurer of Camara de Empresarios Latinos, one of the largest and strongest Hispanic organizations in the city of Houston. He has conducted financial and accounting seminars for the Houston Small Business Development Corporation, as well.

Tax planning.

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