Taxpayers whose incomes dropped in 2017 due to last year’s hurricanes–especially those who lived in areas affected by Hurricanes Harvey, Irma and Maria–may be eligible for the Earned Income Tax Credit (EITC). The EITC is a credit for low and moderate income workers and families. Here’s how it works:

If you lived in one of the federally declared hurricane disaster areas during 2017, you may be able to use a special computation method that enables you to claim the EITC or claim a larger than usual credit. This special method is only available to people who lived in a hurricane disaster area.

Under this method, taxpayers whose incomes dropped in 2017 can choose to figure the credit using their 2016 earned income rather than their 2017 earned income. Eligible taxpayers should figure the credit both ways to see which yields the larger EITC.

About the EITC

The EITC helps working people who earned $53,930 or less for 2017 (adjusted annually for inflation). To claim the credit taxpayers must also meet other eligibility requirements.

The maximum refund is $6,318 refund for working families with qualifying children; however, actual credit amounts vary based on income, family size, and other factors. Workers without a qualifying child with incomes below $20,600 could also be eligible for a smaller credit of up to $510.

Because it is a refundable credit, those who qualify and claim it could pay less federal tax, pay no tax or may even get a refund. On average, EITC adds $2,445 to refunds. To take the credit, people must file a tax return, even if they owe no tax and even if they normally aren’t required to file.

To qualify for the EITC, an eligible taxpayer must meet basic rules and have earned income from working for someone, being self-employed or running a business or farm. This includes home-based businesses, the sharing economy, and employment in the service, construction and agriculture industries. In addition, certain disability payments may qualify as earned income for EITC purposes.

Reminder: By law the IRS cannot issue refunds before mid-February for tax returns that claim the EITC or the Additional Child Tax Credit (ACTC). The IRS must hold the entire refund–even the portion not associated with EITC or ACTC. This change helps ensure taxpayers receive the refund they deserve and gives the agency more time to detect and prevent errors and fraud.February 27, 2018, is the earliest EITC/ACTC related refunds arrive in taxpayer bank accounts or debit cards–if they chose direct deposit and there are no issues with the tax return.

For more information about the EITC and other refundable credits, please contact me.

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