A taxpayer works for an employer and earns $55,000 in wages. He is out of work in February and files a worker's comp claim. He is paid as an employee for the entire year using his sick and vacation time while the worker's comp claim is being decided. The tax return is filed with $55,000 in wage income. Subsequently, the worker's comp case is decided in the employee's favor and it is decided that the employee earned nontaxable worker's comp income for the time he was out of work.
A W-2C is issued showing $7,000 in wages. I am filing an amended return and the 1040 shows that the taxpayer is eligible for EITC based on the amended amount of income. I am not sure that this is correct. Does the worker's comp income make the taxpayer ineligible for EITC?
