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Lesson 5

Lesson 5. Earned Income Credit (EIC). 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

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Lesson 5

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  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

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