IRS helps hurricane victims

"Your 2004 Earned Income Option"

An Internal Revenue Service online tool will assist the victims of hurricanes Katrina, Rita and Wilma file their taxes this season and offer them a special tax break. The Web site application and disaster telephone hot line are for taxpayers who lost their prior tax records and can use the eligibility without filing delays, according to an IRS press release.

Hurricane victims can access their 2004 earned income amounts by using the new "Your 2004 Earned Income Option" on IRS.gov and entering two pieces of personal information known only to the taxpayer and IRS. Taxpayers without Internet access can use an automated telephone application by calling 866-562-5227.

The special rules for victims of the hurricanes will ease the eligibility requirements for the Earned Income Tax Credit (EITC) and the Additional Child Tax Credit (ACTC), allowing people more options to qualify for substantial tax refunds.

For this filing season, hurricane victims who had smaller earned incomes in 2005 can elect to compute their EITC and ACTC using their larger 2004 earned incomes. The option could result in a larger tax refund. It is limited to individuals who lived in the hurricane disaster areas, and have a higher earned income in 2004 than in 2005.

The option is part of a broader Katrina Emergency Tax Relief Act of 2005, and the Gulf Opportunity Zone Act of 2005 passed by Congress. The selection does not apply to other items on the tax return, and, if selected for EITC, must apply for ACTC as well.

EITC is a refundable federal income tax credit for low-income working individuals and families, partially intended to offset the burden of Social Security taxes and provide an incentive to work. ACTC may be available to certain taxpayers if they have three or more qualifying children or if they have earned income that exceeds the base income level for the year.