This is perhaps one of the best ways the government has introduced, to date, to raise families out of poverty, while requiring them to remain productive citizens. The Earned Income Credit is a refundable credit, that can be received even if no tax due--that makes it a negative income tax. It's the best investment in America's working poor to date, and it is becoming a widely used tool to aid the individual taxpayer.

The Earned Income Credit was brought to the forefront in 1998 by President Clinton, as a means of alleviating the taxing of working families into poverty. What has the earned income credit accomplished over the life of its existence? The earned income credit has provided some additional $3000 dollars per year to families of poverty level incomes; this has enabled better living conditions, better living standards, and a continued march to economic independence for many of these families.

How does the earned income credit work, and who qualifies, let's take a look. The earned income credit is a special tax benefit for working taxpayers with low or moderate incomes. For individuals earning less than certain specific levels with or without qualifying children, there is a tax credit that enables these individuals to receive a credit against taxes due, or a refund of income tax, that is known as a negative income tax. How do you qualify for the earned income credit? Well the qualification process is very simple; taxpayers with no qualifying children who earned less than $12120 over the year qualify for a small earned income credit. Taxpayers with qualifying children who earned less than $36,348 for the year will qualify for the earned income credit.

The maximum amount that can be refunded is $4400 for this tax year, and that is in addition to any refund of taxes already paid. As you can see, the benefit here can be great at tax time, and many families rely upon this aid in order to get them through the year.

But, is it the great benefit it appears, or is it one more opportunity for abuse? The answer here is yes, and yes. The earned income credit is the great benefit that it appears, in that the only way to qualify is to have earned income. This equates to the need and requirement to become a working citizen; you must work and make a contribution in order to qualify. The opposite is also true; many individuals work only long enough to qualify, return to the welfare state, and then also receive a huge tax refund each year. The earned income tax credit should be amended to include a stipulation requiring the taxpayer to obtain gainful employment for at least 9 months each year. This would eliminate the eligibility for welfare in most cases, and create the desired effect of productive, working citizenry.

In addition to the obvious opportunity for abuse discussed above, there's another abuse that is rampant among the poorer citizens of this country: individual taxpayers are claiming dependents that are really not theirs to claim. The refund however, is much larger is children are shared among eligible family members. Instead of only one individual receiving a refund for three children of at most $4400; you now can have two individuals receiving refunds of $2662 and $4400, respectively. See the problem? Although there are due diligence tests that are performed by qualified tax professionals to determine a taxpayer's eligibility, there are some situations where even the best of preventive measures aren't enough. It is for reasons such as these, that we tolerate the minor abuses, in order to help the majority. It is a blessing and a curse at times to live in a country where we operate for the benefit of the majority. It means there are times we must simply turn a blind eye to minor abuses, in order to accommodate the major good.

About the author:

Tony Robinson is a Webmaster and International Author. Visit http://www.tax-portal.com/ for his tax tips.