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Earned income tax credit could pay off

If several children are involved in a family situation where two taxpayers may claim them, the adults can decide to share the children for credit purposes. For example, you can use one child to claim the earned income credit and your spouse can use the other children. Again, if a sharing agreement cannot be reached, the tiebreaker rules would come into play.

Filing specifics

The earned income credit can be claimed on any individual tax return: the 1040EZ, 1040A and 1040. Each form's instruction booklet devotes several pages and accompanying work sheets to the credit.

In addition to the online assistance program, you also can find information and filing examples in IRS Publication 596, Earned Income Credit. Taxpayers with specific questions about or problems with filing for the credit can call the IRS at (800) 829-1040.

Military personnel also need to pay attention to special provisions that could require them to compute the credit two ways. Normally, combat pay is not taxable, but servicemen and servicewomen who received this income now can choose to count it if it will help in their earned income tax credit claim.

Don't forget your state

If you qualify for the EITC on your federal tax return, you also may be eligible for a similar credit from your state. Twenty-two states and the District of Columbia as well as New York City and Montgomery County, Md., offer their residents an earned income tax credit.

The IRS maintains a list of jurisdictions that offer their own EITC. If you have questions about state or local eligibility requirements or how to claim EITC on those returns, check with those tax officials. Bankrate's state tax directory has information on how to contact those offices.

As the federal, not to mention the possible state, paperwork devoted to the earned income credit demonstrates, filing for it can be daunting. But don't be discouraged by the rules. Just make sure you follow them.

If you qualify, the earned income tax credit can give you back a nice chunk of change.

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