If you are considering filing New York bankruptcy, you might have heard of a program called the Earned Income Tax Credit (EITC), and you may be curious if it can help you instead. Chances are it can. The EITC is a mid-1970s policy enacted by Congress that’s designed to help American workers stay above water with an income boost that still encourages them to work, unlike welfare. For workers with difficult debts, the EITC can supplement earnings and help them make their payments.
To qualify for the EITC, you must meet the following criteria:
(1) You must be a U.S. citizen or permanent resident. On your tax return, you must file as jointly if married, you cannot list yourself as a dependent, and you cannot be filing for “foreign income exclusion.” (It’s a way to not pay taxes in the United States if you worked abroad for most of the year).
(2) You need to have an income from a disability plan or employment, which includes self-employment. These are “earned incomes,” hence the credit’s name. There are unearned incomes that don’t count, e.g. dividends, Social Security payments, unemployment benefits, child support payments, rents, and similar types of passive incomes. These will be picked up in the next point.
(3) The credit is based on your combined earned and unearned incomes, your marital status, and the number of “qualifying children” you have. For 2014, a non-married earner with no dependents must have an income of no greater than $14,590 to be eligible for the credit; for married earners that’s $20,020. With one qualifying child, a single earner can’t make more than $38,511 before being disqualified. All investment income, e.g. the dividends, rents, etc. discussed above, must be less than $3,350.
(4) Speaking of which, what is a “qualifying child”? By relationship, qualifying children may be biological, adopted, or children of your own children. Stepchildren and foster children also meet the definition. The definition is so broad that siblings and their children can also be qualifying children. They must have a Social Security number, reside with you, and cannot have filed a joint tax return.
(5) If your tax liability for 2014 is less than the credit, you will get the difference between the two. For earners with no qualifying children, the maximum credit will be $496, but earners with three or more children can receive up to $6,143.
(6) Notably, the IRS now allows same-sex married couples to take advantage of the EITC.
There are some other details that are important to understanding how the EITC, but it can certainly help earners stay afloat. The IRS has a comprehensive Web site on the topic. However, if the EITC isn’t enough to help you pay your debts, then you should talk to an experienced New York bankruptcy lawyer.
For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced Brooklyn bankruptcy attorney Bruce Weiner for a free initial consultation.