20 percent of eligible taxpayers miss out on Earned Income Tax Credit

Thousands of Iowans are expected to lose out on a possible tax credit that provided an average of $2,200 last year because of failure to file for the Earned Income Tax Credit, the IRS says.

About one in five eligible tax payers did not claim the Earned Income Tax Credit last year, the agency said Friday, Jan. 28.

The credit was created in 1975 to offset Social Security tax and provide Americans with an incentive to work even at relatively low income levels. Workers who earned $48,362 or less from wages, self-employment or farm income last year could receive larger refunds if they qualify for the Earned Income Tax Credit. An estimated 26 million workers are eligible.

A new eligibility category was created for families with three or ore children by the American Recovery and Reinvestment Act of 2009, which increased the maximum benefit for tax years 2009 and 2010.

The maximum benefit is now $5,666 for taxpayers with three or more qualifying children. For individuals with one qualifying child, the maximum benefit is $457.

The changes were extended through 2012 by the Tax Relief and Job Creation Act of 2010.

The IRS' Verlinda Paul said about 30 percent of the filers under the program change every year, meaning their are many new eligible filers and previously eligible filers who've learned about the credit.

“We know there will be a lot of people who qualify for their very first one” Verlinda said of the 2010 income tax year.

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tool on the IRS web site helps calculate eligibility for the Earned Income Tax Credit. Eligibility can also be determined by using the IRS' free file option online.