Lesson 30 Earned Income Credit.  Purpose– reduce tax burden and supplement for the working low income.  Refundable – can get more than you owe  Maximum.

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Presentation transcript:

Lesson 30 Earned Income Credit

 Purpose– reduce tax burden and supplement for the working low income.  Refundable – can get more than you owe  Maximum --$5666

Earned Income  “EARNED”  Salaries, wages, tips and other taxable employee pay  No inmate pay  Page H-1 Resource Guide

Investment Income  Interest and Dividends  If more than $3,100 –no EIC  Eligibility Rules pg H-3

Advanced EIC  Not available in is last year  Must have one child  Must complete W-5  Box 9 on W-2  Must file if you receive  Adds to the amount you owe

Where reported  EARNED INCOME CREDIT  Resource Guide pg 6-1 line 66a(1040)  Page 16 Line 41a 1040A instructions  Page 12 Line 9a 1040EZ instructions  ADVANCED EIC  Resource Guide pg 6-1 line 61  1040A Line 36  1040EZ can’t use – have to have a child

Who gets it Resource Guide pg H-2  Must have SS#  Must be a citizen or resident alien  Cannot be a qualifying child  Cannot be MFS  No Form 2555 (Foreign earned income)  No investment income over $3,100

If you have a child  Must be a qualifying child  Child can only be claimed by one person  Isn’t parent then qualifying child  If both use the kid than whom the child lived the longest  Highest AGI will get the EIC for debates

Adopted Child  Must have SS #. Can file amended when rec’d

If you don’t have a child   Not a dependent  6 months or more in USA

Income Limitations Children Single Head of Household Married Filing Joint

 Both Earned Income and Adjusted Gross Income must be below the maximum amount.

Disallowance  Can be denied due to reckless or intentional disregard – 2 years  If fraud – denied for 10 years

Let’s review  Page 30-4 Exercises  Example pg 30-4  Page 30-6 Exercises

Determine the amount of EIC  EIC Tables