Question: How many Hawaii residents miss out on getting a refund from the IRS because they don’t file for the Earned Income Tax Credit?

Answer: We estimate that on a national average, 1 in 5 taxpayers who are eligible for EITC do not claim it or file a tax return. There were 105,806 Hawaii taxpayers who claimed the EITC in 2011. That means there are thousands of eligible Hawaii taxpayers who could have claimed the Earned Income Tax Credit last year but failed to get their money.

Q: What is the Earned Income Tax Credit?

A: The Earned Income Tax Credit is a federal tax credit to help low- to moderate-income working individuals and families keep more of what they earned. The credit is available for certain people who work and have earned income under $49,078. Congress originally approved the tax credit legislation in 1975 in part to offset the burden of Social Security taxes and to provide an incentive to work.

Q: How much money did Hawaii residents get from the Earned Income Tax Credit for tax year 2010?

A: For tax year 2010 tax returns that were filed in 2011, Hawaii taxpayers who qualified received $215 million with an average EITC amount of $2,028.

Unlike most credits, EITC is a refundable credit. In other words, when EITC exceeds the amount of taxes owed, it results in a tax refund to those who qualify for and claim the credit. The credit is available to qualified people even if they owe no tax or are not required to file federal taxes. EITC puts more money in their pockets and more money into Hawaii’s economy.

Q: Who qualifies for the Earned Income Tax Credit?

A: Workers who earned $49,078 or less from wages, self-employment or farm income last year may qualify for the EITC. That could mean up to $464 in EITC for people without children and a maximum credit of up to $5,751 for families with three or more qualifying children.

Because one-third of the eligible population changes annually as their financial, marital and parental statuses change, Hawaii taxpayers should check to see if they are eligible this year, even if they weren’t eligible in previous years.

Q: What should I do if I think I might be eligible for the credit?

A: People can see if they qualify by visiting irs.gov and answering a few questions using the EITC Assistant. To get the EITC, workers must file a tax return, even if they are not required to file, and specifically claim the credit. Those eligible for the EITC have free options to file a tax return to claim the credit:

» Free File on irs.gov. Free brand-name tax software walks people through a question-and-answer format to help them prepare their returns and claim every credit and deduction for which they are eligible. The program allows people to file electronically for free and to get their refunds faster. Taxpayers who e-file and use direct deposit can have their refunds issued in as few as 10 days.

» Free tax preparation sites. EITC-eligible workers can seek free tax preparation at more than 12,000 Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) sites. To locate the nearest VITA site, people can call the IRS at 800-906-9887. Taxpayers can also find VITA/TCE sites by calling their community’s 211 or 311 line for local services.

» IRS Taxpayer Assistance Centers. EITC-eligible workers can seek free assistance in IRS locations across the country. Locations are listed online at irs.gov. Hours and services offered vary by location and should be checked before visiting. There are assistance centers in Honolulu, Wailuku and Hilo.

More information on EITC and detailed eligibility rules are available at www.irs.gov/eitc.

Interviewed by David Butts. "Akamai Money" seeks out local experts to answer questions about business in Hawaii. If you have an issue you would like us to tackle, please email it to business@staradvertiser.com and put "Akamai Money" in the subject line.