Tax-Time Boost for Low-Income Workers

The earned-income tax credit is available to many low-income workers. It can result in a federal-tax refund check even when no tax was withheld and none is due.

To qualify, the taxpayer must have earned income such as wages, salary or tips. The taxpayer also can have investment income of up to $2,300.

The amount of the credit depends on whether the taxpayer has what the IRS calls “qualifying children.” A qualifying child is a son, daughter, stepchild, adopted child, grandchild or foster child who in 1998 was under 19, was permanently disabled or was under 24 and a full-time student. The child must have lived with the taxpayer for more than half the year.

The maximum credit is $3,756 with two or more qualifying children, $2,271 with one qualifying child and $341 without a qualifying child.

The maximum amount of income the taxpayer may have earned to receive a credit is $30,095 with two or more qualifying children, $26,473 with one qualifying child and $10,030 without a qualifying child. Income in this case includes such items as 401(k) salary deferrals, tax-exempt interest, housing allowances and employee meals that often are not counted as income in other IRS formulas.

To apply for the credit, fill out Schedule EIC and include it with your tax return. IRS Publication 596, “Earned Income Credit,” explains how the credit works.