10.1 Overview

The IRS administers the Earned Income Credit (EIC), the largest federal anti-poverty program; it is also sometimes known as the Earned Income Tax Credit (EITC). The EIC is a tax refund for qualified low-income workers—even those who did not pay any income taxes or have children.

Because the EIC is a fully refundable credit, those who qualify for the EIC not only pay less tax, but may pay no tax at all or even get a tax refund, which may be substantial. Many low-income households depend on the EIC refund to catch up on bills or make major purchases, such as a vehicle. Conversely, denial of this tax refund can lead to huge tax debts and financial crisis for a taxpayer. Clients often lose their homes to eviction or foreclosure when they are denied the EIC.

A worker may claim the EIC and receive a tax refund even if the worker paid no tax whatsoever. However, an income tax return must be filed to obtain a refund.  A taxpayer who did not apply for an EIC in any of the last 3 years may be eligible for EIC payments by filing amended returns for those years.