What Is the EIC?


Quick Answer

In the United States federal taxation system, the EIC, or EITC, is the earned income tax credit awarded to individuals who earn low to moderate levels of income. As of 2014, the current EIC benefit is available to working single people and couples with or without children, and is based on the amount of income earned and the number of qualifying children. The intent behind the creation of the EIC, which was first enacted in 1975 and then expanded, is to reward people for working and to make employment more attractive and affordable.

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Full Answer

EIC claimants must file a tax return in order to receive the credit, even if they do not owe taxes. The IRS forms that need to be filed are Form 1040 or Form 1040A and must be accompanied by a completed Schedule EIC. Filers without qualifying children are able to use IRS Form 1040EZ.

The original Congressional writers of the EIC sought to alter the behavior of poor people by providing them with an incentive to seek employment. Significant expansions to the EIC occurred in 1993 and were spurred on by U.S. President Bill Clinton whose stated view was, "If you work, you should not be poor." However, concerns arose that the EIC might result in poor people having more children to raise the credit amount, or that single mothers might avoid marriage. It appears that this may not be the case as reported from a study of low-income tax filers. The study noted that unmarried interviewees did not perceive the EIC incentives as a reason to avoid marriage. Regarding the issue of childbearing to boost EIC tax refunds, the tax credit incentives were not viewed as amounts proportional to the cost of child raising.

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