Who gets earned income tax credits - and how

Posted: Wednesday, January 30, 2002

For the thousands of Juneau residents who bring home annual paychecks totaling less than $33,000, refunds may be in order.

The refund is in the form of an Earned Income Tax Credit.

"People ordinarily have heard about it, but they won't know the exact law," said Robyn Gee, manager of Brown & Associates, a Juneau tax-return-preparation firm that works with individuals and businesses. Brown & Associates has been in Juneau for 27 years, and Gee has worked for them for 14 years.

The tax credits have "huge amounts of qualifications," Gee said, which makes them convoluted if not downright mysterious to the average taxpayer. However, the three main qualifying points are:

• If you are a single taxpayer between the ages of 25 and 65 and make less than $10,710 a year.

• If you are a single or married taxpayer with one qualifying child and make less than $28,250.

• If you are a taxpayer with two or more qualifying children and earn less than $32,121 per year.

The "qualifying child" is defined, said Gee, as a biological offspring or a legal stepchild, niece or nephew. "If the child is a foster child living with you, it must have been placed by an agency." A letter attesting to the placement is necessary to prove the placement to the IRS.

Although income tax returns aren't due until April 15, Gee already has seen a couple of returns that qualified for Earned Income Tax Credits. "I have seen as much as $2,000 or $3,000 in refunds," she said.

Wayne Longacre, office manager for H&R Block, said he has seen tax credit refunds "in that range," and that the tax credit is "aimed at lower-income taxpayers."

"The basic fact is you need earned income; some people miss that," Longacre said. "If you have no earned income - if all your money comes from permanent fund dividends or interest - you would not qualify."

H&R Block charges a minimum of $55 to prepare taxes, with fees increasing "based on the number of forms to be filed and the complexity of the return," Longacre said. "Earned Income Tax Credit will mean a bunch of additional calculations," so preparing a return for someone claiming it would usually cost more than $55. Longacre has worked for five years as a tax preparer and is licensed to represent clients before the IRS.

The Earned Income Tax Credit has been around for many years, and has benefited 18 million taxpayers. However, the threshold for income increases each year as the cost of living rises. That adds to the confusion of qualifying, Gee said.

"A lot of people who make $10,000 don't know about it. It's a part of the 1040 that people don't know what to do with."

"The other part of filing income tax this year that is confusing is tax rebates," Gee added. On the one hand, you don't need to declare tax rebates as income. On the other hand, if you did not receive a tax rebate, "you could still qualify to get it."

Income tax forms and booklets of instructions are available in the lobby of the State Office Building, but the "booklets," at nearly 300 pages, are rather daunting.

Juneau boasts more than a dozen local tax-preparation firms and certified public accountants who can, for a fee, help customers with interpreting Internal Revenue Service regulations. The process for the tax credits needn't take all day. "Fifteen minutes tops," Gee said. "We have a checklist people go through to see if they qualify."

A free publication, IRS Publication 596, "Earned Income Tax Credit," is available by calling (800) 829-3676. The publication can also be downloaded from the Internet at the IRS Web site, www.irs.gov.

Ann Chandonnet can be reached at achandonnet@juneauempire.com.

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