Earned Income (Tax) Credit (EIC or EITC)

The EIC is a benefit for working people who earn low or moderate incomes. Single people who worked full-time at some point in 2001 can qualify for the EIC.

• Workers who were raising one child in their home and had a family income of less than $28,281 can get an EIC of up to $2,428.
• Workers who were raising more than one child in their home and had a family income of less than $32,121 can get an EIC of up to $4,008.
• Workers who were not raising children in their home, were between ages 25 and 64, and had a family income of less than $10,710 can get an EIC of up to $364.

The EIC is a refundable credit. That means that it will pay off any federal taxes you owe, plus you will get the extra credit in the form of a refund. Either you can calculate the EIC, or the IRS will do it for you. If you have kids, you have to file either the 1040 or 1040A as well as the schedule EIC. If you don't have kids, you don't have to file the Schedule EIC.

If you are raising kids, you can get the EIC distributed in your paycheck throughout the year, rather than in a lump sum after filing your taxes. This is called the Advance EIC payment option. In most cases, the EIC does not affect eligibility for benefits such as TANF, Medicaid, food stamps, SSI, or subsidized housing. Be aware that studies have shown that people are more likely to spend small amounts of money distributed throughout the year on consumables rather than assets and debt reduction. Lump-sum payments are easier to set aside for wealth development.

Make your EIC work with your IDA
You can put an EIC lump sum payment into your IDA and double it. Or, you can set up the advance EIC and have that money deposited directly into your IDA slowly throughout the year, so you don't "really" have to make savings deposits from your paycheck.

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