Line 8a: Earned Income Credit
You are eligible to claim the Earned Income Credit if you meet the following criteria:- Your Adjusted Gross Income on Line 4 is less than $12,880 (or $15,880 married filing jointly) with no qualifying children. If you have children, you will need to use Form 1040A or Form 1040 to claim your dependents and calculate your earned income credit.
- You and your spouse cannot be claimed as a dependent by someone else.
- You and your spouse are between the ages of 25 and 64.
You can use the EIC Assistant on the IRS website if you are not sure if you qualify. Click on the the link that reads "Start Here: Am I an Eligible Individual?"
How to calculate the Earned Income Credit:
Use the worksheets in the IRS Instructions for Form 1040-EZ, pages 12 through 14, to calculate your Earned Income Credit.
Use your "earned income" figure from the worksheet on page 13 to look up your tax credit amount on the EIC tables on page 16. Use the worksheet on page 14 to help you verify which number to indicate for the earned income credit.
Or, if you want, the IRS to calculate your Earned Income Credit for you, enter the word "EIC" on Line 8a.
Or, even better, you can use the EIC Calculator on the IRS Web site. Go to the EIC Assistant and click on "Tax Year 2008" and then "How Much is My Credit?"
Put the EIC figure on Line 8a.
Line 8b: Nontaxable Combat Pay Election
If you served in the military and received combat pay, your non-taxable combat pay is shown on your W-2, Box 12, code Q. There will be a dollar amount next to the "Q."You can choose to include your combat pay for Earned Income Credit purposes, or you may choose to leave it out. (Choices like this are called an "election" in tax-jargon, hence this line is called the nontaxable combat pay election.)
Calculate your EIC credit amount both ways. First calculate the credit using only your "earned income" from the worksheet, and then calculate it again using your "earned income" plus your combat pay. Take whichever credit amount is higher.
If you decide to include your combat pay, enter the amount coded as "Q" on your W-2 on Line 8b. If you are not including your combat for EIC, leave Line 8b blank.
Here's a link to more information about the nontaxable combat pay election from IRS Publication 596.
Line 9: Recovery Rebate Credit
The recovery rebate credit is a one-time only tax credit that's related to last year's economic stimulus rebate. The rebate is available for people who either did not receive their stimulus rebate during 2008 or whose rebate is higher when calculated using their 2008 income information.To figure your recovery rebate amount (if any), use the two-page worksheet found on pages 17-18 of the 1040EZ instruction booklet.
Line 10: Total Payments
Add the figures from Lines 7, 8a, and 9. Put the total figure on Line 10.This represents the total amount of money paid in towards your income tax, or what we call refundable credits. Withholding, the earned income credit and the recovery rebate credit are all fully refundable credits, and so they show up here in the payments section of the 1040EZ form.
Line 11: Tax
Look at the figure on Line 6. This is your taxable income.Use this figure to look up the amount of tax using the tax tables in the 1040EZ instruction booklet, beginning on page 28.
Put the tax amount on Line 10.
Lines 12a or 13: Refund or Amount Due
Using a calculator, enter the figure on Line 10 (your total payments), and subtract the figure on Line 11 (your tax).Look at the result.
If the number is positive, you have a refund. Enter this figure on Line 12a.
If the number is negative, you owe additional tax. Enter this figure on Line 13.
Do you owe? Owing additional tax is never fun. It means not enough money was withheld from your paycheck to cover your income tax. And now you have to pay the balance when you file your tax return. To prevent this from happening again next year, Fill out a new Form W-4 to have more taxes withheld from your paycheck. Trying claiming either zero or one withholding exemptions on your new W-4.
Lines 12b, 12c, and 12d: Direct Deposit
If you are getting a refund, the amount on Line 12a can be deposited directly to your checking or savings account. Getting direct deposit is faster and more secure than getting a refund check mailed to you, since there's no check to get lost or stolen. However, direct deposit comes with one big drawback. Your bank account information in this section must be absolutely 100% correct.Get out your checkbook, and look at one of your checks. In the bottom left-hand corner you will see lots of numbers. The first series of numbers should be a 9-digit bank code. This is called the Routing Number. Copy your routing number to Line 12b.
Next, check the appropriate box on Line 12c, depending on whether you want your refund deposited into a checking or savings account.
Next, find your account number on your check. Enter your account number on Line 12d.
Triple check your bank numbers! The IRS will send the refund to the bank account you indicate. Making a mistake here could cost you your refund. Once the IRS issues a direct deposit, it is often difficult and sometimes even impossible to get that refund back. In fact, many people have lost their tax refunds forever by making a mistake with incorrect direct deposit information. Please check your direct deposit information at least three times. If you need help with the routing number and account number, call your bank and ask them.
