Tax Credits There are a number of federal and state tax credits available to eligible W-2 working families that can reduce their tax burden and increase income. Federal and Wisconsin Earned Income Tax Credits The federal Earned Income Tax Credit (EITC) and Wisconsin Earned Income Credit (EIC) are available to working individuals who have low or moderate income. To qualify for these tax credits, individuals must have earned income from employment or self-employment. When a tax credit exceeds the amount of taxes owed, this results in a tax refund. To qualify, individuals must meet certain requirements and file a tax return, even if they do not owe any tax or are not required to file. Note: W-2 paid placement benefits (i.e. Community Service Job [CSJ], W-2 Transition [W-2 T], At Risk Pregnancy [ARP], Stipends for Noncustodial Parents [TSP], and Custodial Parent of an Infant [CMC] payments) are not considered earned income and are not subject to income tax credits. However, employment outside of W-2 and any pay received from an employer through participation in Transform Milwaukee Jobs, Transitional Jobs, or the Trial Employment Match Program (TEMP) during the previous year are applicable for income tax credits. Federal tax refunds are disregarded income for W-2 and will not disqualify working families from W-2. All federal tax refunds, including from tax credits, are not counted as income or as an asset for 12 months when determining an individual’s eligibility or benefit amount for W-2, Job Access Loans, Emergency Assistance, Transform Milwaukee Jobs, or Transitional Jobs. Working individuals may be eligible for both Wisconsin and federal tax credits if they worked any time in the previous year. They may be able to get a combined total of state and federal credits up to: $8,678 if they have three or more children and family income less than $51,464 (single), $57,414 (married). $6,615 if they have two children and family income less than $47,915 (single), $53,865 (married). $3,728 if they have one child and family income less than $42,158 (single), $48,108 (married). $1,502 if they do not have any children and family income less than $21,430 (single), $27,380 (married). For more information on the federal EITC, please visit the federal EITC Information page or IRS Publication 596. For more information on the Wisconsin EITC, please visit the Wisconsin Department of Revenue's EITC website. The Internal Revenue Service has an interactive tax assistant that assists individuals with determining if they can claim the EITC and with calculating the amount of the credit. Wisconsin Homestead Credit The Wisconsin Homestead Credit (HC) is available to low-income Wisconsin residents who rent or own their home. The credit lessens the impact of property taxes and rent. Working individuals may be eligible for up to a maximum tax credit of $1,160 if they were a Wisconsin resident for all of the previous year, can provide an original rent certificate signed by the landlord (if renting) or a copy of the previous year's property tax bill (if owning a home) and had a family income less than $24,500 for the previous year. The following provisions apply to individuals who received a W-2 payment in the previous year: If an individual received any amount of a W-2 payment in any month of that year, the individual’s property taxes and rent are reduced by one-twelfth for each month the individual received a W-2 payment. If an individual received a W-2 payment for all 12 months of the previous year, the individual is ineligible for the HC. For more information on the HC, refer to the Wisconsin Department of Revenue's Homestead Credit Common Questions page. Federal Child Tax Credit The Child Tax Credit (CTC) is available to families with a qualifying child. Working families may be eligible for up to the maximum federal tax credit of $3,000 per dependent child aged 6-17 and $3,600 per child younger than 6. If the amount of the CTC is greater than the amount of income tax a family owes, the family may receive part or all of the difference as an Additional CTC. In 2021, half the total CTC amount was available to receive in monthly advance payments. If you received advanced child tax credit payments in 2021, you must file your 2021 income tax return to claim the remaining CTC. The IRS has an interactive interview that assists families with determining if they are eligible for the CTC. Filing Taxes for Previous Years Individuals may file for federal tax credit refunds for the three previous tax years, even if they have not filed tax returns for those three years. If applicable to their situation, the individuals would still be eligible to receive EITCs and CTCs for those previous years. For more information on how to file a tax return for a prior year, call the IRS phone number for individual assistance at 1-800-829-1040 or visit the IRS website. Tax-Related Scams The IRS maintains a webpage listing common scams taxpayers may encounter at any time during the year. The webpage warns of callers claiming to be IRS employees who tell victims they owe money that must be paid promptly via a gift card or wire transfer. The webpage also warns of email messages that fraudulently use the IRS logo or contain links to invalid websites intended to mirror the official IRS website; these emails seek to obtain an individual's personal and financial information. In an effort to help protect taxpayers from tax scams, the IRS has stated, “The IRS doesn't call to demand immediate payment using a specific payment method such as a prepaid debit card, gift card or wire transfer." The IRS has further stated, "The IRS doesn't initiate contact with taxpayers by email, text messages, or social media channels to request personal or financial information." For more information regarding tax scams and consumer alerts, visit the IRS Tax Scams/Consumer Alerts webpage. To report tax-related scams and learn what to do if a suspicious communication is received, visit the IRS Report Phishing and Online Scams page. Tax Information in Other Formats The IRS website can be displayed in Spanish, Chinese, Vietnamese, Korean, and Russian. The IRS operates local Tax Assistance Centers (TACs) that provide free over-the-phone interpreter services in over 170 languages. To find a list of TACs in Wisconsin, refer to the IRS website. To use a Telecommunications Relay Service for persons with hearing or speech disabilities, dial 711. Tax Preparation Resources Volunteer Income Tax Assistance The Volunteer Income Tax Assistance (VITA) program offers tax preparation help to low-income individuals. IRS-certified volunteers provide free basic income tax return preparation with electronic filing at various sites in local communities. VITA sites are generally located at community and neighborhood centers, libraries, schools, shopping centers, and other convenient locations. Most VITA sites are open from February 1 through April 15, and some require an appointment. To find a VITA site, call 1-800-906-9887 or use the VITA Locator Tool on the IRS website. For more information about the VITA program, visit the IRS website. Fees and Commercial Tax Preparation Some tax preparation companies offer money up front to individuals seeking tax refunds but charge very high interest rates and fees to access the money. Some companies also charge an extra fee to pay tax preparation costs out of an individual's tax refund, while others offer the refund amount via a high-fee debit card. All of these practices can result in individuals losing a portion of their tax refunds. W-2 participants should be knowledgeable about these types of tax preparation services and not sign anything without fully understanding the terms and conditions of the contract. Participants are encouraged to use VITA sites. These sites are free and have free electronic tax filing, which can result in a speedier tax return.