Each year, more and more tax filers are turning to online tax preparation websites in order to keep more of their tax refund.
When these tax preparation websites burst on the scene a few years ago, most tax filers were able to prepare and e-file their returns at no costs. In the past year or two, however, most of these websites have begun to charge fees for services that used to be free.
Perhaps, the most obvious of these new fees are for tax filers who claim the Earned Income Tax Credit (EITC), a refundable credit that can increase tax refunds for low-income filers with or without qualifying dependents. Tax preparation sites, like H & R Block’s, now charge fees for tax filers wishing to claim the EITC because claiming the credit requires an additional form, the Schedule EIC, to be filed with the return.
The Earned Income Tax Credit is based on income levels and the number of qualifying dependents the tax filer claims. Tax filers who have qualifying dependents must file a Schedule EIC with their return and provide information about their qualifying dependents on the Schedule EIC.
Tax filers who are single or married filing jointly without qualifying dependents are not required to file Schedule EIC. However, many of the tax preparation websites, including HRBlock.com, are bilking low-income tax filers without qualifying dependents by charging them fees to claim the EITC.
While filing a “made-up” tax return for a single tax filer who made approximately $9,000 in 2014 and who has no qualifying dependents, HRBlock.com reported that:
“Based on what you’ve told us, you qualify for the Earned Income Credit (EIC). Your refund has increased by $410! To claim this $410 credit, as well as any state EICs you qualify for, you’ll need Schedule EIC. Unfortunately, it’s not included in Free Edition. Click Upgrade to Basic Edition to upgrade to H&R Block Basic. You’ll pay just $19.99 once you’re ready to file your return. You can even use your refund to pay for your upgrade.”
The truth is, this particular filer, like millions of others, is not required to file a Schedule EIC because he has no qualifying dependents. According to the IRS, tax filer may claim the Earned Income Tax Credit without having a qualifying child and filing Schedule EIC if the tax filer is not claimed as a dependent on another person’s return, live in the U.S. for more than half the year, and is between ages 25 and 65.
To qualify for the Earned Income Tax Credit, earned income and adjusted gross income (AGI) must both be less than:
|If filing…||Qualifying Children Claimed|
|Zero||One||Two||Three or more|
|Single, Head of Household or Widowed||$14,590||$38,511||$43,756||$46,997|
|Married Filing Jointly||$20,020||$43,941||$49,186||$52,247|
Investment income must be no more than $3,350 for the year to claim the EIC.
The maximum amount of the Earned Income Credit for Tax Year 2014 is:
- $6,143 with three or more qualifying children
- $5,460 with two qualifying children
- $3,305 with one qualifying child
- $496 with no qualifying children