Q: I recently received in my electric bill a notice about whether I'd qualify for the Earned Income Tax Credit this year. What is the EITC, and how do I know if I qualify to receive a refund? I am single with no children and had an internship for most of 2003 that only paid a stipend, not a full salary.
A: The goal of the Earned Income Tax Credit is to help working people who earn low wages to retain more of their income, especially people with children. Both major political parties have supported the EITC over the years, and the amount that qualifying taxpayers can claim continues to increase since the program started in 1976.
Because many people don't know about the EITC or don't try to claim these tax credits that they're entitled to, the IRS and nonprofit organizations run educational efforts around the country. This is probably why you received a flyer in your energy bill about it.
As a single person with no children, you will qualify for the EITC as long as your income for 2003 was under $11,200, but the amount you'll receive depends on exactly how much you made. It could be as low as $4 or up to a maximum of $380. The maximum figure increases significantly for people with children.
Taxpayers with one qualifying child who earn under $29,700 can receive up to $2,500, and those earning under $33,700 with two or more qualifying children can receive up to $4,200. (The income limits are about $1,000 higher for married taxpayers filing jointly.) Even if you didn't earn enough to pay taxes this year, you may qualify for a refund of your withheld payroll taxes.
When filling out the "Earned Income Credit" line of the tax form, you can either write in the amount you are claiming or just write "EIC" on the line. If you write "EIC," the IRS will determine the amount for you and send a refund. If you want to calculate the amount for yourself, you can use the table supplied with Form 1040. For more information, take a look at the IRS' .
Jean Chatzky’s Bottom Line:This week: Rollover reality checkOnce you roll your money out of a 401(k) plan with limited choices and into a rollover IRA, you need to manage it wisely.
If you have a hefty nest egg, you’ll need substantial diversity among stocks, funds, and other assets. Clearly, an IRA rollover to a good brokerage firm or other money management firm allows for this. But don't assume you need to automatically make big changes with your asset allocation because you've rolled over.
Early on, your primary focus should be on stocks. Even in retirement, there are a couple of stages you'll go through. At first, you'll need as much growth as you did when you were working. That means keeping your portfolio unchanged for the first couple of years. As you age, you can shift your money to less volatile assets (like bonds), depending on your financial needs.
Jean Chatzky is the financial editor for “Today,” editor-at-large at Money magazine and the author of “Talking Money: Everything You Need to Know About Your Finances and Your Future.” Copyright © 2004. For more information, go to her Web site, .