lesson 5 earned income credit (eic). objectives determine which taxpayers are eligible for the...
TRANSCRIPT
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
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
Who Can Claim The EICGeneral Requirements -
continued
• Have earned income• Cannot be qualifying child of
another person
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
Earned Income
• Review notes– While an inmate– While an household employee– Disability benefits– Disability insurance payments
• Examples of Earned Income
Who Can Claim The Credit With A Qualifying Children
Must meet all 3 tests– Relationship Test– Age Test – Residency Test
Definitions
• Eligible foster child• Adopted child• Permanently and totally disabled• Child who was kidnapped
Qualifying Child of More than One Taxpayer
• Cannot be used by more than one person
• EIC Tie-Breaker Rule
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
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.
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
EIC – General Information
• EIC – Eligibility Tools• Common EIC Return Errors• Disallowed Earned Income
Credit• Advance Earned Income Credit
Payments (AEIC)
Quality Review (QR)
Form 8158 – Quality Review Checklist
Adjustments, Deductions, and Credits Section