Tax Credits
Tax credits are benefits you can get only by filling out state and federal income tax forms. They can be received in a check, or can be used to reduce the amount of tax you owe. You should file federal and state taxes even if your income is so low that you do not owe taxes, or if you get paid in cash, because that is the only way you can get these credits.
There are now several different tax credits, and you might qualify for all of them. You can get an estimate of how much money you may be able to get back in tax credits by using the calculator at
https://www.ftb.ca.gov/file/personal/credits/EITC-Calculator/Home .
The federal tax credits require that you file the “long form.” You can get help by calling (800) TAX-1040 or (800) 829-1040.
Documents you need to file tax returns and get the most money back in refunds or tax credits include:
- Current photo identification
- Social Security cards or Individual Taxpayer Identification Number (ITIN) forms for you and your family
- Prior year’s tax returns (if available)
- Voided check or bank statement to direct deposit your return
- Wages from each job (W-2)
- Advance Child Tax Credit (IRS Letter 6419) if you received advance child tax credit payments in 2021 (they were $300 a month)
- Your Third Economic Impact Payment (IRS Letter 6475)
- Interest (Form 1099-INT) if you have one
1. Federal Earned Income Credit (EITC)
“The Earned Income Tax Credit” (EITC) is a check that low-income working people can get from the government by filing a federal income tax return or filling out a W-5 form during the year, even if your income is so low that you do not owe federal taxes. You need a valid social security number to get this money.
For the 2021 tax year (taxes that you pay by April 2022), the earned income credit ranges from $1,502 to $6,728 depending on tax-filing status, income and number of children. People without kids can qualify.
For the 2021 tax year, the following income limits to qualify for the federal EITC apply for unmarried workers:
| Number of children | Income Limit |
| 0 | $21,430 |
| 1 | $42,158 |
| 2 | $47,915 |
| 3 or more | $51,464 |
If you are married filing jointly these are the income limits to qualify:
| Number of children | Income Limit |
| 0 | $27,380 |
| 1 | $48,108 |
| 2 | $53,865 |
| 3 or more | $57,414 |
The maximum amounts you can receive in your Earned Income Credit are : $1,521 for household with no children, $ $3,618 for one child, $5,980 for two children, and $6,728 for three or more children.
There are changes for tax year 2021 that you should know that will be only for that year:
- If your income in 2021 is less than your 2019 income, you can use your 2019 earned income to calculate your EITC. Choose the year that gives you the bigger refund. If you are married filing jointly, the total earned 2019 income refers to the sum of each spouse’s earned income in 2019.
- The American Rescue Plan has greatly increased the amount of Earned Income Credit, but only for the 2021 tax year. The income limits will be lower to qualify, and you will receive less money for the 2022 tax year. For example, for the 2022 tax year, for households without children, the income limits will be $16,480 for single person and $22,610 for married couple. The maximum credit will only be $560.
More details are available at https://www.caleitc4me.org/what-is-the-caleitc/
If you are receiving CalWORKs, or CalFresh (Food Stamps), the DHA cannot count the EITC payment as part of your income if you spend the money in the month received or the month after. For the General Assistance program, this money is counted as income.
You can also file for “retroactive” payments from the past three years. If you do not owe taxes, there is no penalty for filing for the credit late (after April 15th).
You can claim EIC by filing Form 1040, US Individual Income Tax Return or Form 1040 SR, U.S. Tax Return for Seniors. If you have a qualifying child, you must also file the Schedule EIC (Form 1040 or 1040-SR), Earned Income Credit to provide information about them. However, you may not use the 1040EZ form (the shortest form) to claim your EIC.
For help getting the credit you can call the EIC hotline at 1-800-601-5552.
To get a 1040 or 1040 SR form for this year and past years, and to receive free tax assistance call the IRS at (800) 829-3676 and ask for VITA-Volunteer Income Tax Assistance. Forms are also available in libraries, post offices and other public places.
If you choose, you can receive this payment spread out during the year in lower payroll tax deductions instead of getting it all at once at the end of the year. To do this, ask your employer to fill out a W-5 form.