Mr. and Mrs. Harvey's tax liability before credits was $1,675. Their income tax withholding was $1,050, and they are entitled to a $1,189 earned income credit. Which of the following statements is true?

Question

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The Harvey's tax liability before credits was $1,675, and their income tax withholding was $1,050. Therefore, they still owe $625 ($1,675 - $1,050) in taxes.

However, they are entitled to a $1,189 earned income credit. This credit will first be used to reduce their tax liability, and any excess credit will be refunded to them.

So, their tax liability after the earned income credit is applied is $486 ($1,675 - $1,189). Since they already have $1,050 withheld, they are entitled to a refund of $564 ($1,050 - $486).

Therefore, the correct answer is C. The Harveys are entitled to a $564 tax refund.

Mr and Mrs