tampabay.com

Many fail to claim Earned Income Tax Credit

By HELEN HUNTLEY
Published February 4, 2007


Karen Daley had never heard of the Earned Income Tax Credit until two years ago. Now thanks to the credit for low-income workers, the 38-year-old Tampa woman has paid off her student loans, gotten her finances in order and sees home ownership in her future.

Daley is one of more than 22-million taxpayers who claimed more than $41-billion worth of earned income credits last year. Yet the IRS says millions of others qualify but don't file. About $20-million goes unclaimed in Pinellas and Hillsborough counties, according to the Prosperity Campaign, a coalition that sponsors free tax filing as part of an effort to help low-income families improve their finances.

Families with earned incomes of up to $38,348 may be eligible for the credit, which goes up to $4,536. Families with two or more children get the most money.

Daley, a career counselor at the nonprofit Corporation to Develop Communities of Tampa, is a single parent of four children who range in age from 8 to 16. She said she hadn't filed her tax return for several years because she had defaulted on federal student loans and knew the government would claim her refund. Daley said she owed $35,592 on loans she used to get a business administration degree from Massey Business College in Atlanta.

"After the kids started coming, I thought I never would be able to pay it back," she said. A volunteer tax preparer helped Daley claim not only the EITC, but the child credit and the child care credit for three years of returns. Her combined refund was close to $14,000, all of which went to pay down her student loan. Since then she has paid off the balance.

"This year when I file, my EITC will be coming back to me and going into my housing fund," she said. "By August or September I should be able to buy a house."

Volunteers are available to help low-income people with their taxes at sites throughout the Tampa Bay area. To find a site near you, call the IRS at 1-800-829-1040.

Corporate Voices for Working Families also offers an employer guide for companies that would like to help their low-income workers learn more about their benefits. More information is available at www.cvworkingfamilies.org.

Your questions

My wife and I are paying for a nonfamily member's college tuition. Are we eligible to take a deduction for this expense?

No.

My husband's name is on the 1098 tax form on our house. Can we file separately or do we need to file together? Would it hurt to file separately?

Filing separately means paying more taxes in most situations. If you and your husband file separately, you both must either itemize or take the standard deduction. In other words, he can't take all the deductions on his return while you get the standard deduction on yours. When you file jointly, it makes no difference whether his name or yours is on the mortgage interest form.

Can I continue to file as head of household since I have a qualified dependent, even though I got married in July? I only lived with my husband six months of the year.

No. Married couples who live together have two choices: married filing jointly or married filing separately. The rules are different if you are legally separated or if you lived apart for the last six months of the year.

Is the required pay for a waiter in Florida still $2.13 an hour?

No. Although employers can count tips toward the state minimum wage of $6.67, they still must pay a minimum salary of $3.65. The amounts change every Jan. 1. You can find more information at the state's Agency for Workforce Innovation Web site www.floridajobs.org.

Helen Huntley writes about investing and markets for the Times. If you have a question about investments or personal finance, write hhuntley@sptimes.com or Helen Huntley, Times, P.O. Box 1121, St. Petersburg, FL 33731. Read more questions and answers at http://blogs.tampabay.com/money.