University of Wisconsin - Extension

MADISON, Wis.—Many Wisconsin residents can get thousands of dollars back at tax time, thanks to valuable state and federal tax credits, according to Judi Bartfeld, University of Wisconsin-Madison/Extension Family Resource Management Specialist. These credits include the federal Earned Income Credit, the Wisconsin Earned Income Credit, the Wisconsin Homestead Credit, and the federal Child Tax Credit. And this year, many residents can also get a Telephone Excise Tax Refund.

If you are eligible for these credits, they can reduce your taxes—sometimes all the way to zero. If you are eligible but don’t owe taxes, you can get a check back from the government. But, you have to file a tax return to get the credits, and you have to indicate on the form that you are eligible. Many people miss out, either because they don’t file a tax return or don’t indicate that they qualify for the credits.

The Earned Income Credit is designed to get more money into the pockets of low-income workers. Between the federal and state Earned Income Credits, families with one child can receive up to $2857, families with two children receive up to $5171, and families with three or more children receive up to $6480. To qualify, you need to have earned income, and your total income must be between $32,000-$38,000, depending on the number of children and your marital status. In 2005, 11,940 families with children in Dane County received the federal and state earned income credits (see http://www.dor.state.wi.us/ra/06eitc05.pdf, table 3 for county information); Dane County recipients claimed approximately $3.7 million, for an average credit of $311. Statewide, the average combined credits were worth around $2500!

To claim the federal earned income credit, file either the 1040 or 1040A tax form, along with Schedule EIC. You can even claim the credit for past years if you were eligible, by filing an amended return. To claim the state earned income credit, file Wisconsin tax form 1 or 1A. The Wisconsin credit can also be claimed for several years if you were eligible but didn’t file.

In addition to the earned income credit, many low-income families can also get money back from the federal Child Tax Credit. Families with earnings of at least $11,300 during 2006 may be eligible for up to $1000 per child. To claim this credit, file the 1040 or 1040A tax form. If you are eligible to get money back, you also need to file form 8812.

Renters and homeowners with incomes of less than $24,500 may also qualify for the Wisconsin Homestead Credit, worth up to $1160. This credit is designed to lessen the impact of rent and property taxes on low- and moderate-income families. If you qualify, you could get back some or all of the state income taxes that were withheld. If your earnings were too low to have taxes withheld, you could still get cash back. To claim this credit, file Schedule H or H-EZ along with a copy of your property tax bill or rent certificate signed by your landlord. You have five years to file for the Homestead Credit—so if you missed out in past years, it’s not too late.

Finally, the Telephone Excise Tax Refund (TETR) is a one-time payment available on your 2006 federal income tax return. It is designed to refund previously collected long distance telephone taxes. Individuals, businesses and tax-exempt organizations are eligible, and you don’t have to have records of your phone bill. If you are not filing an income tax return you can just file form 1040EZ-T to claim the refund.

Low-income families don’t have to pay to get their taxes prepared. The VITA (Volunteer Income Tax Assistance) Program offers free tax preparation for low- and moderate-income families. Contact the Dane County UW-Extension Financial Education Center, Villager Mall, 2300 S. Park Street, Madison, at 608-261-5077 for a list of VITA sites in Dane County. For an online list by county, see http://www.dor.state.wi.us/faqs/pcs/vita.html#county. You can also file your own taxes electronically, and for many families this can be done at no cost. The Internal Revenue Service has a Free File program that allows taxpayers with an Adjusted Gross Income of $52,000 or less to file their returns electronically with no charge. And, Wisconsin Free File provides free electronic filing of Wisconsin state income tax returns and Homestead Credit claims, provided you meet certain requirements. Information about both programs is available at the Wisconsin Department of Revenue website, at http://www.revenue.wi.gov/eserv/irsfree.html.

To learn more about these tax credits, visit UW-Extension’s tax credit website at http://www.uwex.edu/ces/econ. This website can help you figure out if you may be eligible. It also gives instructions on how to file, provides links to tax forms, and can help you locate free tax assistance.