More than 30,000 working poor Marylanders are failing to take advantage of the federal earned income tax credit -- a break designed to ensure that people working full time do not fall below the poverty level, state and federal tax officials said yesterday.
"The earned income credit is one of our most important tools to reward work," Rep. Benjamin L. Cardin, (D-3d) told a press conference at the Baltimore office of the U.S. Internal Revenue Service. "The key to welfare reform is to reward work."
Internal Revenue Service Commissioner Margaret M. Richardson said experts believe the credit goes widely unclaimed because low-income workers are less likely to understand the tax code well enough to find and claim the credits and deductions. About 10 percent of eligible Marylanders failed to claim it last year, leaving an estimated $30 million on the table.
The earned income credit is a tax break of up to $2,528 for low-income workers. Childless workers can claim the credit if their family income is below $9,000 and they are between the ages of 25 and 64 and not claimed as dependents on someone else's return. Parents with two children can earn up to $25,296 in adjusted gross income and still qualify for a credit.
Workers with families and with qualifying incomes get up to $2,528 for families with two children and $2,038 for families with one child. The maximum credit for childless workers is $306.
The credit, which is not available for income from public assistance, has been popular with politicians because it channels money to low-income people who work, and is designed to assure that the combination of the credit and a full-time job even at minimum wage is enough to lift workers and their families above the poverty line.
The bipartisan support was evident yesterday, as congressional representatives from each side of the aisle attended the morning news conference.
A credit also can be claimed even if a taxpayer has a total tax bill smaller than the credit -- or does not owe any tax at all.
The government also requires employers to give eligible employees 60 percent of their anticipated credit as part of workers' paychecks during the year, which can add $105 a month to workers' take-home pay. Maryland also offers an earned income tax credit equal to up to half the federal credit, comptroller Louis L. Goldstein said. But Maryland caps the credit at the amount of tax the citizen would otherwise have to pay for the year, making it possible for state taxes to be reduced to zero but not allowing workers to get a credit so large that it amounts to a negative income tax.
For more information, call the IRS help line at 1-800-829-1040 or the number for free state income tax assistance, 1-800-MD-TAXES (1-800-638-2937).