University of Wisconsin - Extension

Contact Judi Bartfeld, 608-262-4765, judi.bartfeld@ces.uwex.edu

Madison, Wis.--Low-income workers who are eligible for certain state and federal income tax credits can significantly lower their taxes--sometimes all the way to zero. In many cases, the credits total more than the taxes owed, so workers may be entitled to a check for the difference.

"The Earned Income Credit is designed to get more money into the pockets of low-income workers," says Judi Bartfeld, University of Wisconsin-Madison/Extension family resource management specialist.

To get the credits, workers must file a tax return and indicate on the form that they are eligible.

"Many people miss out on these tax breaks, either because they don’t file a tax return or don’t indicate that they qualify for the credits," says Bartfeld.

Between the federal and state Earned Income Credits, families with one child can receive up to $2967, families with two children receive up to $5376 and families with three or more children may receive up to $6744. To qualify, you need to have earned income, and your total income must be below approximately $33,000-$40,000, depending on the number of children and your marital status.

Workers without children can also qualify for a smaller credit, if their income is below around $12,500 to $14,500, depending on marital status.

To claim the federal earned income credit, file either the 1040 or 1040A tax form, along with Schedule EIC. You can 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.

Statewide, the average combined state and federal earned income credits, among families who received both were worth around $2500 per household.

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 $11,750 during 2007 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 may also need to file form 8812.

Renters and homeowners with incomes of less than $24,500 may 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.

Low-income families do not need to pay to get their taxes prepared. The VITA (Volunteer Income Tax Assistance) Program offers free tax preparation for low- and moderate-income families. For a list by county, see http://www.dor.state.wi.us/faqs/pcs/vita.html#county

Families can also call 800-829-1040 for information on VITA site locations.

In 2004, about two-thirds of earned income credit recipients in Wisconsin used a paid tax preparer. These families could save substantial amounts by using a free provider.

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 $54,000 or less to file their returns electronically at no charge.

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.

For more information, contacy your local county UW-Extension office.