Question

Taxpayers eligible to claim the earned income credit can use it to reduce their tax liability and, in some cases, to create a tax refund, True or False

Answer 1

Given statement is true.

The earned income credit, also known as the earned income tax credit (EITC) was introduced to keep families out of poverty while encouraging everyone to work, whether single or married. The EIC is only available to low-income earners and some middle-income families. Households that qualify for the EIC can reduce their tax liability to zero, in which case they will owe no income taxes. In a case where the income tax owed is reduced to an amount below zero, the government will issue a tax refund for the difference. Example:A tax credit reduces the value of a taxpayer's liability, dollar for dollar. For example, an individual with a tax bill of $5,000 and who can claim a $600 credit, will reduce his taxes to $5,000 - $600 = $4,400. This is the amount that he pays to the Internal Revenue Service (IRS).

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