Grand Rapids Press, March 10, 2008: Hard times mean more qualify for tax credit
Monday, March 10, 2008
By Rick Haglund
DETROIT — There’s a bit of a silver lining for hundreds of thousands of people in the dark cloud of Michigan’s economy: Declining wages for many lower-income workers last year likely make more of them eligible for the federal earned income tax credit.
Last year, 665,000 Michigan residents received $1.2 billion from the credit, in addition to their regular refund from the 2006 tax year, according to the Internal Revenue Service.
With Michigan’s economy still slumping, the IRS says there are probably even more people eligible for the credit this year — and they may not know it.
“It may not be on taxpayers’ radar screen, even though they’re making less money,” IRS spokesman Luis Garcia said. “The economy is hurting in Michigan, and more people may qualify for the credit this year.”
Also, people who have earned income but are not required to file a tax return may qualify for the credit.
Those who have already filed tax returns, but think they might be eligible for the credit can amend their returns by filing Form 1040X, Garcia said. Returns can be amended for the previous three tax years.
The IRS reports non-English speakers, nontraditional families, the homeless and rural residents are among those who may not realize they qualify.
Nationally, the IRS estimates as many as one in four taxpayers who are eligible for the credit don’t claim it.
“It’s an incredibly important anti-poverty tool, and it’s a critical income supplement at a time low- and moderate-income families in Michigan are struggling mightily to make ends meet,” said Sharon Parks, vice president for policy for the Lansing-based Michigan League for Human Services.
A new state earned-income tax credit that provides eligible filers with 10 percent of the federal credit goes into effect for this tax year.
Taxpayers will be able to claim the credit on their tax returns next year. The state credit increases to 20 percent of the federal credit in the 2009 tax year.
Like everything else about income taxes, eligibility for the federal credit can be complex. But in general, a taxpayer may be able to take the credit for the 2007 tax year by meeting the following criteria:
· Has a qualifying child and earned less than $33,241, or $35,241 if married and filing jointly.
· Has more than one qualifying child and earned less than $37,783, or $39,783 if married and filing jointly.
· Does not have a qualifying child and earned less than $12,590, or $14,590 if married and filing jointly.