Examples of items that are not earned income include interest and dividends, pensions and annuities, Social Security and railroad retirement benefits (including Disability Insurance); alimony and child support; public assistance; Workers' Compensation; Disability Benefits; Unemployment Insurance; nontaxable foster care payments; and veterans' benefits, including VA rehabilitation payments. In addition, nontaxable workfare payments and amounts received for work performed while an inmate is in a penal institution are not earned income.

Assets:
The earned income credit cannot be claimed unless investment income is $2,650 or less.

Age:
Tax filers with children: not a condition for the tax filer with children.
Qualifying child(ren): The child who qualifies the tax filer for the EITC (qualifying person) must not have attained the age of 19 at the close of the tax year, or, if a full-time student, as defined by the Internal Revenue Code, must not have attained the age of 24. For a disabled child, there is no age limit.
Tax filers with no children: If the tax filer has no children, he/she must be at least age 25 but under age 65 at the end of the tax year. For those in the married, filing a joint return tax category, it does not matter which spouse meets the age test, as long as one does.

Employers' Disability Plans:
Benefits received under employers' disability plans are considered earned income until the minimum retirement age is reached. Minimum retirement age generally is the earliest age at which a person could have received a pension or annuity if he/she were not disabled.

Payments received from a disability insurance policy for which premiums had been paid by the tax filer are not earned income.

Presence of Spouse:
Not a condition.

Married Claimants:
If married, usually a joint return must be filed to claim the EITC. Filing status cannot be "Married filing separately.” If the tax filer is married and his/her spouse did not live in the same home at any time during the last 6 months of the year, the tax filer may be able to file as head of household, instead of married filing separately and, in that case, might be able to claim the EITC.

Presence of Children:
A qualifying child must be a son, daughter, adopted child, stepchild, grandchild, or eligible foster child. A brother, sister, stepbrother, or stepsister (or the child or grandchild of a brother, sister, stepbrother, or stepsister) may also be a qualifying child if this individual is cared for as one's own child. The child must have lived with the tax filer in the United States for more than half of the year for which the claim is made. A qualifying child must have a valid Social Security number (SSN), unless the child was born and died during the tax year.

Prior Contribution:
Not a condition.

Exhaustion of Benefits From Other Programs:
Not a condition.

Job Search (Employment/Work Requirements):
Not a condition.

Participation in Work Program:
Not a condition.

Workfare:
Nontaxable workfare payments are not earned income for the purposes of the EITC. These are cash payments received from a state or local agency that administers public assistance programs funded under the Federal Temporary Assistance for Needy Families (TANF) program or New York State Safety Net program.

School Attendance:
Required only if the qualifying person is between the ages of 19 and 23, in which case the qualifying person must be a full-time student, unless disabled.

Citizenship/ Legal Alien Status:
Not a condition, but the residence of the tax filer must be the United States. Legal immigrants can qualify for the EITC, as long as they meet the eligibility requirements.

Other Eligibility Conditions:
Retroactive EITC:
Workers can file for the EITC for the last 3 years. For example, a worker who was eligible for the EITC in 2001 but did not claim it can fill out a 1040X form for the year 2002 and attach it to a copy of the regular 2002 tax form he or she filed that year. The worker also must fill out and attach Schedule EIC for 2001. Copies of prior-year forms may be obtained by calling 1-800-TAX-FORM. Families must meet the eligibility and income requirements in effect for the year they are seeking credit.

If both Parents Claim a Child(ren): If the child is a qualifying child of both parents, they may choose which one will claim the credit. If there are 2 qualifying children, each parent may claim the credit on the basis of 1 of the children. If both actually claim the credit on the basis of the same child or children, the parent who is entitled to the credit is the parent with whom the child lived for the longest period of time during the tax year or the parent with the higher Adjusted Gross Income (AGI), if the child lived with each parent for the same amount of time during the year.

Nonresidents of New York State do not qualify for refunds of the New York State EITC.

For 2004, some employees with at least 1child living with them may be entitled to receive advance EITC payments in their paychecks. To receive advance payment, the employee must file Form W-5, Earned Income Credit Advance Payment Certificate, with an employer to receive the advance payments. The employer then pays part of the credit to the employee in advance throughout the year. The tax filer claims the rest when filing the 2004 federal tax return.

New York State Earned Income Tax:
Provided by New York State, similar to, and in addition to the Federal EITC.

Level:
The EITC has the following characteristics: a phase-in range for which a credit is paid as a rate of adjusted gross income, up to a maximum amount; a range of income on which the maximum credit is paid and after which the credit is gradually reduced or phased out; a phase-out range in which the credit is reduced at a specified or phase-out rate; and an income cutoff when the credit is reduced to zero.

* Workers who were raising one child in their home and had family Aggregated Gross Income of less than $30,338 (or $31,338 for married workers) in 2004 are eligible for an EITC.

** Workers who were raising more than one child in their home and had family income of less than $34,458 (or $35,458 for married workers) in 2004 are eligible for an EITC.

*** Workers who were not raising children in their home, were between ages 25 and 64 on December 31, 2004, and had income below $11,490 (or $12,490 for married workers) are eligible for an EITC.

* Workers who were raising one child in their home and had family income of less than $29,666 (or $30,666 for married workers) in 2004 can get an EITC of up to $2,650.

** Workers who were raising more than one child in their home and had family income of less than $34,458 (or $35,458 for married workers) in 2004 can get an EITC of up to $4,204.

*** Workers who were not raising children in their home, were between ages 25 and 64 on December 31, 2004, and had income below $11,490 (or $12,490 for married workers) can get an EITC of up to $390.

New York State EITC
For tax year 2004 the New York State Earned Income Credit is equal to 30% of an allowable federal earned income credit. However, the New York State earned income credit is reduced by the amount of any household credit allowed.

To qualify for the credit, cut-offs are the same as the federal cut-off levels, both the earned income and the adjusted gross income for 2004 must be less than $30,338 for a tax filer with one qualifying child ($31,338 for married filing jointly), $34,458 for a tax filer with more than one qualifying child ($35,458 for married filing jointly), and $11,490 for a tax filer with no qualifying children ($12,490 for married filing jointly).

Change in Recipient Status:
Changes occur when tax filers no longer have a qualifying child, they no longer have earned income, their income exceeds relevant income cutoffs, and, in the case of the State credit, they move out of the State.

The tax filer's employer must be supplied with a new Form W-5 (if a W-5 form had been provided to the employer for Advance Income) if any of the following situations arise: the tax filer no longer has a qualifying child; is no longer eligible for EITC; or no longer wants advance payments.

For the New York State EITC, filers will receive only a partial credit if they have moved and their legal residence is no longer New York State.

Changes in Benefit Levels:
Changes in federal benefits are approved by Congress, which has the authority to alter the Internal Revenue Code, and signed by the President. Changes in New York State benefits are made by the New York State legislature and signed by the Governor.

Federal Credit:
Claimants must file a Federal income tax return-- either Form 1040 or 1040A-- and attach a separate "schedule" or form with their return. With form 1040, claimants must attach Form 2441. With Form 1040A, claimants use Schedule 2

Workers raising children in 2002 must file either Form 1040 or 1040A and must fill out and attach Schedule EITC. Workers with children cannot get the EITC if they file Form 1040EZ or fail to attach Schedule EIC.

Married workers must file a joint return to get the EITC.

Workers who were not raising children in 2004 can file any tax form - including the 1040EZ.These workers write "EITC" (or the dollar amount of their credit) on the Earned Income Credit line on the tax form. They do not file Schedule EIC.

A correct name and Social Security number must be provided for every person listed on the tax return and Schedule EITC. If this information is incorrect or missing, the Internal Revenue Service (IRS) will delay the refund.

Workers do not have to calculate their own EITC; if they choose, the IRS will do it for them!

Assistance is available from a Volunteer Income Tax Assistance (VITA) site from January 1st through April 15th. To find their closest VITA site, tax filers may call the IRS at 1-800-829-1040.

State Credit:
To claim this credit, complete Form IT-215, Claim for Earned Income Credit, and attach it to Form IT-200, IT-201, or IT-203. Tax filers filing Form IT-100 can claim this credit by completing the applicable section on the back of Form IT-100. This program is based on the earned income and income tax forms must be filed even if no taxes are owed to apply for the EITC money.

Tax forms may be obtained at libraries, post offices, banks and over the Internet. The address for getting federal forms is www.irs.gov (click on forms and publications). The address for getting state forms is www.tax.state.ny.us (click on forms and instructions).

For help with New York State taxes, claimants may call 1-800-225-5829 or they can also receive help by visiting a Volunteer Income Tax Assistance Center (VITA). To find a VITA center near them, claimants should call the IRS toll free number listed above.

Workers do not have to calculate their own EITC; the New York State Department of Taxation and Finance will do it if indicated on the tax form.

Financing:
Federal EITC:
By federal general revenues, 54.3% of which are derived from personal and corporate income taxes. Most benefits go to claimants whose incomes are too low to pay federal income taxes. Therefore most EITC benefits are direct expenditures from federal general revenues. A small portion of benefits goes to claimants who do pay federal income tax; these are Tax Expenditures, meaning the Federal Treasury gets less money in taxes from these claimants.

New York State EITC: from a combination of New York State general revenues and from an allowable use of surplus funding in the Temporary Assistance to Needy Families block grant which is a federal grant. State funds are are derived from a combination of income (50%), sales (25%), and property (25%) taxes.

Sometimes a tax filer may neglect to supply all the information necessary for establishing eligibility for the credit. The IRS will usually write a letter saying that the credit is denied unless additional information is supplied. If this occurs, the tax filer should go to the local IRS office and provide the information required.

The IRS may question the basis for the credit, such as payment of upkeep expenses or whether the tax filer's home is the main residence of the qualifying person. The tax filer will have to submit documentation substantiating childcare expenses and the qualification requirements.

If a tax filer feels the credit has been denied unfairly, he/she could continue to reapply for it with additional documentation. There are no Fair Hearings procedures or any external form of adjudication except a tax filer's suit that would probably cost the tax filer more than the potential EITC benefits. A tax filer could consult Legal Services (See Legal Services) about problems in establishing eligibility for the credit.

A tax filer who has attempted to deal with an IRS problem unsuccessfully, should contact his/her Taxpayer Advocate.

The Taxpayer Advocate represents the tax filer's interests and concerns within the IRS by protecting a filer's rights and resolving problems that have not been fixed through normal channels. While Taxpayer Advocates cannot change the tax law or make a technical tax decision, they can clear up problems that resulted from previous contacts and ensure that a case is given a complete and impartial review.

Taxpayer Advocates may be contacted by the following means:

Telephone 1-877-777-4778. Telephone, write, or fax the Taxpayer Advocate office in the tax filer's area. Call 1-800-829-4059 for Telephone Typewriter or Telecommunications Device for the Deaf : TTY/TDD users.

New York State:
If a tax filer disagrees with an action taken by the Department of Taxation and Finance, the filer may challenge the action by filing a CMS-1, Request for Conciliation Conference. If the disputed amount is within certain monetary limits, the tax filer may elect to have the hearing held in the Small Claims Unit.

The request or petition must be filed within a certain period from the date the department mailed the notice of its action; this time period is specified in the notice. These time limits are established by the Tax Law and cannot be extended. Certified or registered mail is recommended to file the protest. A taxpayer may appear on his/her own behalf or may have an authorized representative to present the case for review. An authorized representative must have a power of attorney.

Conciliation Conference:
A conciliation conference is a rapid and inexpensive way to resolve protests without a formal hearing. The conference is conducted informally by a conciliation conferee who will review all of the evidence presented. After the conference, the conferee will issue a conciliation order. This order will be binding unless the taxpayer files a petition for a hearing with the Division of Tax Appeals within 90 days after the conciliation order is issued. To request a conciliation conference the tax filer should write to:

Bureau of Conciliation and Mediation Services
New York State Tax Department
Building 9
W A Harriman Campus
Albany, NY 12227

Tax Appeals Hearing:
To request a tax appeals hearing, the tax filer should file a petition to the Division of Tax Appeals. The petition must be in writing and must specifically indicate what actions of the department are being protested. The hearing is an adversary proceeding before an impartial administrative law judge. After the hearing, the Administrative Law Judge (ALJ) will issue a determination which will finally decide the matter(s) in dispute unless either party requests review of the decision by the Tax Appeals Tribunal. If such a review is requested, the record of the hearing and any additional oral or written arguments will be reviewed and the Tribunal will issue a decision affirming, reversing or modifying the ALJ's determination, or referring the matter back to the ALJ for further hearing.

Court Review:
If the taxpayer does not agree with the Tax Appeals Tribunal's decision, a court review may be pursued. There are time limits within which an application for court review must be filed.

Small Claims Option:
Instead of a Tax Appeals hearing or a conciliation conference, a hearing may be held in the Small Claims Unit if the amount in dispute is within the dollar limits set by the Rules of Practice and Procedure, a copy of which is sent with the petition forms. The hearing is conducted as informally as possible by an impartial presiding officer. The presiding officer's determination is conclusive and is not subject to review by any other unit in the Division of Tax Appeals, the Tax Appeals Tribunal or by any court in the state.

To request petition forms and the Rules of Practice and Procedure of the Tax Appeals Tribunal a tax filer should write to:

Division of Tax Appeals
Riverfront Professional Tower
500 Federal Street
Troy, NY 12180-2894

A request for petition forms and the rules is not considered the filing of a petition for a hearing for purposes of the time limits and does not extend the time limits for filing a petition.