There are a number of changes and other details taxpayers should be aware of before filing their 2007 returns.
The Earned Income Tax Credit (EITC) enables working people with children as well as those earning below a certain threshold to receive a tax credit. When the EITC exceeds the amount of taxes owed, it results in a refund for those who claim and qualify for the credit. However in order to be eligible you must file a tax return even if you did not earn enough money to be obligated to file a return.
You can apply for the credit, if your earned income and adjusted gross income is less than $37,783 ($39,783 married filing jointly) and you have two or more qualifying children; make less than $33,241 ($35,241 married filing jointly) and have one qualifying child; or if you earn $12,590 ($14,590 married filing jointly) and have no qualifying children.
The credit ranges from $428 if you have no children to $4,716 for those with two or more qualifying children.
A qualifying child meets these criteria: is a son, daughter, adopted child (or child lawfully placed for legal adoption), stepchild, eligible foster child, or a descendant of any of them (such as a grandchild); or the person is your brother, sister, half-brother, half-sister, stepbrother, stepsister, or descendant of any of them (such as a niece or nephew); and at the end of the year was under age 19, or under age 24 and a full-time student, or any age if the individual was permanently and totally disabled at any time during the year; and lived with you in the United States for more than half of the year.
Additionally, if you are a member of the United States armed forces and served in a combat zone, certain pay is excluded from your income, which may enable you to qualify for the EITC.
In order to qualify for the credit, there are basic criteria that must be met. These include:
(1) having earned income from employment or self-employment;
(2) having a valid social security number for yourself, your spouse if filing jointly, and any qualifying children;
(3) being a U.S. citizen or resident alien for all of 2007;
(4) having investment income of less than $2,900;
(5) having a filing status of married filing jointly (if you are married). Your spouse must also meet these guidelines; and
(6) being between the ages of 25 and 65 by the end of the year, if you do not have a qualifying child
To get more information about the EITC, visit the IRS website at www.irs.gov.
Other significant changes for 2007 include the following:
* Taxpayers who claim the tuition and fees education must fill out and attach the new Form 8917.
* Contribution limits to Individual Retirement Accounts (IRA) and other retirement plans have risen but the deduction is phased out for singles and heads of household who are covered by a workplace retirement plan and have income between $52,000 and $62,000. Also if your spouse has a workplace retirement plan and you do not, the phase-out begins when the combined income is between $156,000 and $166,000.