2009 Changes to the Earned Income Tax Credit (EITC)

The IRS reminds taxpayers that for the 2009 tax year there are new additional EITC and income thresholds for a third qualifying child, as well as changes to the uniform definition of a child.
For tax years 2009 and 2010, the American Recovery and Reinvestment Act (ARRA) created a new category three or more children, which will provide larger credits to larger families. The change in the uniform definition of a child adds two new rules to the definition of who is a “qualifying child.”
The child must::
(1) be younger than the person claiming the child, unless the child is permanently and totally disabled; and
(2) not have filed a joint return other than to claim a refund.Also new for 2009, if a qualifying child can be claimed by both a parent and another person, the other person must have an adjusted gross income (AGI) higher than the parent in order to claim the child for EITC purposes.
For the 2009 tax year, a taxpayer's earned income and (AGI) must each be less than:
... $43,279 ($48,279) married filing jointly) with three or more qualifying children
... $40,295 ($45,295 married filing jointly) with two qualifying children
... $35,463 ($40,463 married filing jointly) with one qualifying child
... $13,440 ($18,440 married filing jointly) with no qualifying children
For the 2009 tax year, the maximum credit amounts are:
... $5,657 with three or more qualifying children
... $5,028 with two qualifying children... $3,043 with one qualifying child
... $457 with no qualifying children
Qualification for the EITC.
To qualify, the IRS explains, taxpayers must meet certain requirements and file a tax return, even if they did not earn enough money to be obligated to file a U.S. individual income tax return.
Other requirements provide that a taxpayer:
... must have earned income
.... must have a valid Social Security number for himself, his spouse (if married filing jointly) and his qualifying child
.... must not have investment income in excess of $3,100
.... have a filing status that's not “married filing separately.”
... generally, be a U.S. citizen or resident alien all year
.... not be a qualifying child of another person
.... not file Form 2555 or Form 2555-EZ (related to foreign earned income)
.... have income that exceeds certain limitations.I
f a taxpayer claims a child, he or she must meet three eligibility tests:
· Residency test. The child must have lived with the taxpayer in the U.S. for more than half of 2009.
· Relationship test.
The child must be the taxpayer's son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, or a descendant of any of them.
A taxpayer's child includes:
... A foster child who was placed with you by an authorized placement agency, or by judgment, decree, or other order of any court of competent jurisdiction; or
... A legally adopted child or a child lawfully placed with you for legal adoption.
· Age test. At the end of 2009, the child must have been under age 19, a full-time student under age 24, younger than the EITC-claiming taxpayer or any age if permanently and totally disabled at anytime during 2009.
A qualifying child cannot be used by more than one person to claim EITC. If a child meets the rules to be a qualifying child of more than one person, only one person can treat that child as a qualifying child and claim EITC.If a taxpayer doesn't have a child, he must meet three additional tests:
... At the end of 2009, you must have been at least age 25, but under age 65.
... The taxpayer can't qualify as the dependent of another person.
... The taxpayer must have lived in the U.S. for more than half of 2009.