The Earned Income Tax Credit (EITC) or Earned Income Credit (EIC) is a refundable tax credit targeted to working people with low to moderate income.
A refundable credit means that you can take advantage of the credit even if you do not owe any tax. Unlike with a nonrefundable credit, if you don’t have any tax liability, the “extra” credit is not lost but is instead refunded to you.
Qualifying For The EITC
To qualify, you must meet certain requirements and file a federal income tax return for the tax year even if you do not owe any tax or are not required to file a tax return. This is a common misunderstanding and is one of the reasons why the Internal Revenue Service (IRS) has over a billion dollars in unclaimed refunds from year to year
You must have earned income. Everybody seems to have a story about a neighbor who got back a huge refund but didn’t work to get it. Notwithstanding that you don’t always know the details about that person’s finances, those refunds—if legitimately obtained—are not tied to the EITC.