The Enterprising Kitchen Tax Return Preparation: Taking Advantage of Community Filing Services 1
Income Tax Return should be filed if you earned wages or other income You may be legally required to file. You may be getting a refund of taxes withheld from your paycheck 2
An introduction to the Earned Income Tax Credit (EITC) What is the EITC or EIC? Who can claim the EITC? How much is the credit? How to claim the credit? 3
What Exactly Is The Earned Income Tax Credit? A refundable tax credit Low-to-moderate income workers Reduces tax liability Tax refund possible 4
What Exactly Is The Earned Income Tax Credit? Any EITC will not affect your eligibility for the following programs, and it will not affect the amount of your benefits from these programs: Temporary Assistance for Needy Families; Medicaid and supplementary security income; Food stamps and housing assistance. 5
WHO CAN CLAIM THE EITC All taxpayers claiming the EITC must: 1. Have a valid Social Security number 2. Not file as married filing separately 3. Not have foreign earned income 4. Meet the investment income limitation 5. Must have earned income 6. Cannot be the qualifying child of another person 7. Generally, must be a U.S. citizen or resident alien for the entire year 6
WHO CAN CLAIM THE EITC Earned income and adjusted gross income must be less than: $38,646 with more than one qualifying child ($41,646 if married filing jointly); $33,995 with one qualifying child ($36,995 if married filing jointly); $12,880 with no qualifying child ($15,880 if married filing jointly). Investment income must be no more than $2950 7
WHO CAN CLAIM THE EITC Qualifying Child Rules To be a qualifying child for EITC, a child must meet all three tests below: 1. Relationship - including certain family members 2. Age less than 19 at end of 2008 (24 if a student). No age limit if disabled 3. Residency live with you for more than half the year A qualifying child cannot be used by more than one person to claim the EITC A qualifying child must have a social security number 8
WHO CAN CLAIM THE EITC Rules for Taxpayers without a qualifying child: 1. Must have lived in the United States more than half of the tax year 2. You or your spouse must be at least age 25 but not age 65 or older at end of 2008 3. Cannot qualify as the dependent of another person 4. Cannot be qualifying child of another person 9
How much is the credit? Eligible taxpayers can receive: Up to $4,824 with more than one qualifying child Up to $2,917 with one qualifying child Up to $438 with no qualifying child Example Form W-2 wages are $5000, single, no children, no other income Credit is $384 10
HOW TO CLAIM THE EITC File a tax return Complete and attach Schedule EIC to the return (if claiming a qualifying child) Complete a worksheet to figure the credit In some cases, the EITC may be available in advance. If this applies, you could receive the credit in your paycheck during the year. 11
HOW TO CLAIM THE EITC Common EITC filing errors Claiming a child who is not their qualifying child Incorrect filing status Incorrect income amounts Incorrect Social Security numbers 12
HOW TO CLAIM THE EITC Social Security numbers necessary for EITC Valid Social Security number Not acceptable for claiming the EITC: Individual taxpayer identification number (ITIN) Adoption taxpayer identification number (ATIN) 13
What Other Tax Breaks May I Get If I File A Tax Return? Recovery Rebate Credit If you did not claim the Economic Stimulus Payment on your 2007 return or your circumstances changed in 2008 so you are now eligible You may claim the credit on your 2008 return Credit is larger of: $300 ($600 if file joint return) if earned income is at least $3000 or Tax liability on return before refundable credits of up to $600 ($1,200 if file joint return) If eligible for credit also get a credit of $300 per child 14
What Other Tax Breaks May I Get If I File A Tax Return? Child Tax Credit This benefit, which can be as high as $1000 per child, is described in IRS Publication 972. Let us know if you need help getting a copy. Eligibility requirements include: Children (and certain other relatives) who are 17 years of age or younger at the end of the year; and Children who are US residents. 15
What Other Tax Breaks May I Get If I File A Tax Return? Credit for Child and Dependent Care Expenses May be available if you pay someone to take care of a child under the age of 13 (or for other dependents who cannot take care of themselves) while you work, or look for work Described in IRS Publication 503 Let us know if you need help getting a copy. 16
What Other Tax Breaks May I Get If I File A Tax Return? Education Credits May be available if you are saving for, or currently paying, education costs for you or for another student to attend certain types of schools. Types of schools include college, university, vocational, other post secondary institutions. Described in IRS Publication 970. Let us know if you need help getting a copy. 17
What Other Tax Breaks May I Get If I File A Tax Return? Retirement Savings Credits May be available if you make eligible contributions to an IRA or to an employer sponsored retirement plan (such as a 401K plan). The tax credit is claimed on IRS Form 8880. Let us know if you need help getting a copy. 18
What Is A Community Filing Service? Volunteer organizations that provide assistance in tax return preparation. These organizations help you prepare and file your tax return at no cost to you. Private companies (such as H&R Block) are in business to make money, and will charge you a fee to prepare your tax return. Similarly, private companies will give you the chance to get an instant refund, but will charge you high fees that reduce the amount of your refund. 19
What s The Catch? Free services are limited to people with need thus, each organization sets an income threshold that defines who is eligible for assistance. It is a volunteer organization. Each volunteer organization has a training program in order to prepare the volunteers to complete tax returns. The person who assists you may not be a tax professional, and some volunteers will be better able to assist you than others. 20
What s The Catch? Still, we hope that you will use a community filing service. Each volunteer organization has a supervisor system in place to help with more complicated questions. The person who assists you wants to be helpful, and will be doing his or her best to assist you. 21
There Are Several Organizations. What Are The Differences Between Them? Based on our research, we have found these differences: The location of the service centers; The number of services centers; The hours of operation of the service centers, and the days that the service centers are open; How the tax return is filed electronically or by mail. 22
Which Organizations Do You Recommend? Based on our research, we recommend the CENTER FOR ECONOMIC PROGRESS (CEP). CEP prepares your tax return for free. People/families who qualify for this free service: Families with income under $45,000; and Individuals with income under $20,000. 23
Which Organizations Do You Recommend? CEP files your tax return electronically. Electronic filing speeds up your refund this helps you avoid paying fees that private companies charge for an instant refund. You may get your refund within 8 days if you have a bank or credit union account. 24
Which Organizations Do You Recommend? CEP offers convenient locations. See attached listing All are first come, first served except for North Side Community Federal Credit Union, which requires appointment on certain days CEP is also preparing returns at Jane Addams Resource Corp. which requires appointment. If you want an account at the North Side Community Federal Credit Union, The Enterprising Kitchen has a relationship with the Credit Union, and you should be able to open an account. 25
Which Organizations Do You Recommend? The Tax Assistance Program also offers free tax return preparation It offers electronic filing It has same income eligibility standards as CEP See attached listing of locations. All are first come, first served. City of Chicago offers phone assistance on specific questions you may have by dialing 311. 26
What Should I Bring When I Go To Do My Tax Return? Your Social Security Card. A picture ID Social Security Numbers for your husband and children or other dependents (bring their Social Security Cards, if possible). 27
What Should I Bring When I Go To Do My Tax Return? Your Bank Account number (so your refund may be deposited electronically to your account). The Routing Number for your bank or credit union: For a checking account, the routing number is printed on every check bring a check with you. For a savings account, the routing number will be on your bank statement or in your passbook, depending on the type of account you have bring a bank statement or your passbook with you. 28
What Should I Bring When I Go To Do My Tax Return? A copy of your tax return for the previous year, if you filed one. All W-2 Forms (from The Enterprising Kitchen and any other place you worked during the year) 29
What Should I Bring When I Go To Do My Tax Return? All forms 1099 received for the following types of income received during the year (and any other forms labeled 1099 that aren t listed below): Unemployment compensation (1099-G) Miscellaneous income (1099-MISC) Interest (1099-INT) Social Security/RR1 benefits (RRB-1099) State and local income tax refunds (1099-G) 30
What Should I Bring When I Go To Do My Tax Return? If you received an Advanced EITC during the year, evidence of the amount you received (check stub, accompanying letter, etc.) If you received any of the following types of income, evidence of the amount you received (check stubs, etc.): Alimony; Jury duty pay; Gambling and lottery winnings. 31
When Should I Go? All sites handle taxpayers on a FIRST COME, FIRST SERVE BASIS except Northside Community Credit Union CEP recommends that you arrive as early as possible in the day to avoid delays. All sites are BUSIEST in late January throughout February. Although tax returns are not due until April 15, many people file early in order to get their refunds as fast as possible. 32
What Can I Do To Avoid Delays And Problems If you can wait until March, the service centers should not be as crowded. Arrive as early as possible. MOST IMPORTANTLY, BRING ALL DOCUMENTATION AND A GOOD ATTITUDE! 33
GLOSSARY Earned income generally includes wages, salaries, professional fees or other payment for personal services. Filing status Single, Married Filing Jointly, Married Filing Separately, Head of Household and Qualifying Widow(er) With Dependent Child. W-2 form annually, an employee should receive a Form W-2 from her employer by January 31 showing the pay received for services. 1099 form a statement of non-wage income received. Investment income earnings from savings; includes dividends and interest generally reported on a 1099 form Adjusted gross income income from all sources before any itemized deductions and personal exemptions 34
TAKE AWAYS It is important to file an income tax return You may receive a refund of taxes that have been withheld from your paycheck You may receive a credit in excess of taxes that have been withheld Use the free tax preparation services available throughout Chicago land 35