posted on Nov, 24 2012 @ 05:09 PM
I'm a tax preparer and accountant. The EITC is a refundable credit(this means you can get money from the govt or it doesn't just lower your taxes
owed) that specifically targets the Non-Investing Class, under $3,150 for the year of income from the sale of stocks and dividends/interest received.
Generally of HOH(Head of Household or MFJ(Married filing jointly) can take the credit as the tax payer. Here is the link for the rules to IRS.Gov
If it goes away taxpayers around the $50,000 will be significantly hurt .
I have heard of serious abuse of this credit though. Families who have 2 or 3 kids claim this credit by claiming they are employed as a house
cleaner. They file a schedule C, self employment form, claim fictitious earnings to the amount of $12,750, pay the taxes owed on those fictitious
earnings, then with all the dependents and exemptions the tax works out to be only a couple hundred $'s, and then they get a fat refund check for
You tell me, how should this dilemma get fixed?
Personally I feel the Alternative Minimum Tax should be fixed first. It was passed in 1969 and the amounts haven't been fixed since then. It is an
Additional Tax, let me repeat that, Additional Tax added to regular income tax which disallows nearly every itemized deduction, including medical
expenses, allowed on the Schedule A. It was designed to target high income earners of $150,000 or more in 1969. With inflation that works out to
approximately $400k today. Families who itemize on a Schedule A and have a mortgage,medical bills, tuition and fees deductions, unreimbursed business
expenses, gambling losses, tax prep fees, legal expense etc are more and more being hit with a tax designed to hit the rich and not the working class.
This comes with the added benefit, generally, of having mis-paid tax estimates, so interest and penalties are added in as well.
It is really time to scrap the current tax code and redesign it.