Earned Income Credit

1
Lesson 5

• Earned Income Credit
• (EIC)

2
Objectives

• Determine which taxpayers are eligible for the
  earned income credit using Publication 4012 and
  Form 13614
• Determine when a taxpayer has a qualifying child
  for the EIC
• Calculate and report the credit using the EIC
  worksheet
• Explain how to request advance earned income
  credit (AEIC) payments
• Report AEIC payments on the tax return

3
Intake/Interview Process

• Form 13614 Intake and Interview Sheet Credits
  Section

4
Military Combat Pay

• Inclusion of combat pay as earned income

5
Who Can Claim The EICGeneral Eligibility Rules

• Earned income and adjusted gross income limited
• Have valid SSN
• No MFS filing status
• A US citizen or resident alien
• Not file Form 2555 or 2555-EZ
• Investment income limitation

6
Who Can Claim The EICGeneral Requirements -
continued

• Have earned income
• Cannot be qualifying child of another person

7
Investment Income

• Includes
• Taxable interest
• Tax-exempt interest
• Ordinary dividends
• Capital gain net income
• Certain net income form rents and royalties
• Net income from passive activities

8
Earned Income

• Review notes
• While an inmate
• While an household employee
• Disability benefits
• Disability insurance payments
• Examples of Earned Income

9
EIC Interview Tips

• EIC General Eligibility Rules

10
Who Can Claim The Credit With A Qualifying
Children

• Must meet all 3 tests
• Relationship Test
• Age Test
• Residency Test

11
Definitions

• Eligible foster child
• Adopted child
• Permanently and totally disabled
• Child who was kidnapped

12
Qualifying Child of More than One Taxpayer

• Cannot be used by more than one person
• EIC Tie-Breaker Rule

13
Children of Divorced or Separated Parents

• If the rules for Divorced or Separated Parents
  apply
• The custodial parent can claim the EIC benefit
  even if he or she cannot claim the child as a
  dependent

14
Interview Tips

• EIC With A Qualifying Child

15
Who Can Claim the EIC Without a Child

• Lived in the United States more than half the tax
  year.
• At least 25 but under age 65 on
• Dec. 31.
• Not qualify as the dependent of another person.

16
EIC Eligibility Requirements - Summary

• Rules for Everyone
• Rules If You Have a Qualifying Child
• Rules If You Do Not Have a Qualifying Child
• Earned Income and AGI Limitations

17
Determining Eligibility and Figuring the Credit

• EIC Worksheets
• EIC Tables

18
Schedule EIC for Qualifying Child(ren)

• Reporting Qualifying Child
• Information

19
EIC General Information

• EIC Eligibility Tools
• Common EIC Return Errors
• Disallowed Earned Income Credit
• Advance Earned Income Credit Payments (AEIC)

20
Quality Review (QR)

• Form 8158 Quality Review Checklist
• Adjustments, Deductions, and Credits Section

21
Lesson Summary

• General EIC Requirements
• Eligibility Rules
• Schedule EIC
• Common EIC Return Errors
• Disallowed EIC
• Advance EIC Payments