Tax credit assists low-income workers

August 18, 1991|By Glenn Burkins | Glenn Burkins,Knight-Ridder News Service

About 14 million low-income families can get a small pay increase this year, compliments of Uncle Sam.

If you qualify for the earned-income tax credit, why wait until April 15 to apply? You can get part of it in your paycheck between now and Dec. 31. Complete Form W-5 -- the Earned Income Credit Advance Payment Certificate -- and give it to your employer, who will calculate the amount you get.

The earned-income credit is just what its name implies -- a tax credit that is applied to a family's earned income. But to qualify for 1991, you must:

*Have earned income.

*Have adjusted gross income of less than $21,250.

*Have a qualifying child living with you for more than six months of the year.

The maximum credit amount for 1991 is $2,020. But the amount you get will depend on your income, the number of qualifying children living in your home and the amount of the health insurance premiums you pay for them.

Any amount you don't get in your paycheck will be sent along after you have filed your 1991 income tax return.

You can get a copy of Form W-5 at most IRS offices or by calling (800) 829-3676.

* Most people start individual retirement accounts with just one investment -- a mutual fund, stocks or even a certificate of deposit. That's fine for starters. But as your account swells, you should diversify.

Here are two possible models, compiled by the American Society of Chartered Life Underwriters and Chartered Financial Consultants in Bryn Mawr, Pa.:

Balance your IRA

Investments... ... Prior to 60... ... ... 61 to 70

... ... ... ... ... ..(pct.) ... ... ... ...(pct.)

Cash... ... ... ... .. 0-10... ... ... ... .. 5-10

Bonds... ... ... ... . 0-10... ... ... ... .. 5-15

Mortgages... ... ... . 5-20... ... ... ... .. 5-20

Stock market... ... . 30-60... ... ... ... . 30-50

Real estate... ... .. 10-20... ... ... ... . 10-20

*

Be careful when selecting a home-improvement contractor. They were the No. 1 source of complaints last year, the Council of Better Business Bureaus says.

The council has a booklet called "Tips on Home Improvements." Send $1 with a stamped, self-addressed, business-sized envelope to the CBBB, Department 023, Washington, D.C. 20042-0023.

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