EITC: The Earned Income Tax Credit

The Earned Income Tax Credit (EITC) is available to low-income workers and their families. Families with one or more children can receive a refund of up to $3,888 from the IRS this year.


Here are some facts about the EITC:

  • Children must live with their parents for at least six months of the year in order for the parents to claim the EITC. If the children live in Mexico or another country for more than six months of the year, the parents do not qualify for the EITC, even though they can claim them as dependents.

  • As of 1996, parents and their qualifying children must be citizens or legal residents of the United States in order for the family to qualify for the EITC. This means that if the mother,father or any of the qualifying children are not properly documented, the family does not qualify for the EITC.

  • The EITC is for workers only. Taxpayers whose only sources of income are welfare, unemployment benefits, social security and worker's compensation do not qualify for the EITC, because such income does not come from work.

  • Single or married taxpayers between the ages of 25 and 65 with no qualifyingchildren who earned less than $10,380 can receive a credit of up to $353. Qualified single or married individuals who have not applied for this refund in the past should do so the next time he or she files a tax return.

  • Married taxpayers should not apply separately for the EITC. The rules do not allow the husband and wife to divide the children between themselves with each receiving the EITC.

  • "Married taxpayers filing separately" do not qualify for the EITC. However, legally separated taxpayers can receive the EITC.

  • Taxpayers have the choice of receiving their EITC refund in their regular pay check or as a lump sum when they file their tax return.

  • It is very important that taxpayers choose a tax preparer who knows the tax laws. A tax preparer who does not know the tax laws can cause the taxpayer a lot of problems with the IRS.

  • Always make sure that the person preparing your taxes signs your tax form.

  • Since 2000, parents can get $500 for each child under the age of 17. This new 'child credit" has rules similar to those of the EITC.

  • Beginning in 2000, a taxpayer who claims the EITC when, in fact, he or she is not eligible to receive it may not be allowed to again claim the EITC for up to 10 years.

  • Workers who earned $31,030 or less in 2005 with one qualifying child ($33,030 for married and filing jointly) to receive a credit up to $2,662.

  • Workers who earned $35,263 or less in 2005 with more than one qualifying child ($37,263 for married and filing jointly) to receive a credit up to $4,400.

  • Workers who earned $11,750 or less in 2005 with no qualifying child ($13,750 for married and filing jointly) to receive a credit up to $399 (must be between the ages of 24-65)

  • Investments cannot exceed $2,700 in order to qualify.

How do Michigan Workers claim the EITC?

This credit is available by completing Schedule EIC in the Federal 1040 or 1040A. Free tax preparation services for EITC eligible tax payers are available. Volunteer Income Assistance, or VITA, program provides IRS-trained volunteers to prepare and file tax returns for free. Credit unions and Michigan Works! Offices are offering a web-based, self-preparation service called I-CAN! EIC™. Written at a fifth-grade level, ICAN! EIC allows eligible tax payers to complete and e-file their federal and state tax returns on their own and for free.

Beware of the Rapid Refund

  • Rapid Refund is also known as the income tax refund advance, instant tax refund, instant tax refund loan, quick tax refund, RAL, Refund Anticipation Loans, rapid tax refund, and tax refund loan.

  • Rapid Refunds are easily confused with the actual IRS income tax refunds received from electronic filing with IRS. Rapid Refunds are NOT tax refunds from IRS, they are high interest loans that use your income tax refund to pay off the loan.

  • The fees charged for a Rapid Refund are high, so you will end up losing a lot of your tax refund to the Rapid Refund business. For example, if your income tax refund is $1000 you could be charged $70 to receive the money you could get from IRS in three weeks.

ATTENTION: If you file electronically, your refund will be sent to you directly in ONLY three weeks

Free Online Tax Assistance and More

For more information about the EITC and free online tax assistance, please visit the Michigan EIC website

To locate free or low cost legal assistance:

  • Visit the Michiganlegalaid.org home page and search for local assistance by entering your zip code in the box marked “Find a lawyer, organization or related service to help you with your problem.” or

  • Look under "attorneys" in the yellow pages to find your local legal aid office, or

  • Contact the Michigan State Bar Lawyer Referral Service at (800) 968- 0738. 

  • Persons age 60 or older, regardless of their income, may be able to receive free advice from the Legal Hotline for Michigan Seniors by calling (800) 347-5297.

This article appears courtesy of the Michigan Earned Income Tax Credit Statewide Initiative.