Level 7

Question

Earned Income Tax Credit

Forum|Forum|5 years ago
January 23, 2021
42 replies
164 views

Hi everybody,

For this year, the IRS will allow taxpayers use the amount of the earned income from 2019 to figure out the EITC, but this is what the IRS says:

Earned Income Tax Credit (EITC) Relief

If your earned income was higher in 2019 than in 2020, you can use the 2019 amount to figure your EITC for 2020. This temporary relief is provided through the Taxpayer Certainty and Disaster Tax Relief Act of 2020.

To figure the credit, see Publication 596, Earned Income Credit.

This is my question: if somebody did not have any earned income at all, can they use the 2019 earned income anyway. I would say yes, but I am not sure. I tried using the Interactive Tax Assistant tool, and when they ask to select type of income I chose none and it told me, you do not qualify for the credit. And that gets me confused. It is possible a taxpayer would need some kind of an earned income or it could be 0.

ProSeries Basic

This topic has been closed for replies.

sjrcpa

Level 15

You cannot get the Earned Income Credit unless you have Earned Income.

The more I know the more I don’t know.

Just-Lisa-Now-

Intuit Community Champion

You need earned income in both years for this option to be used.

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪

A

athaureaux6Author

Level 7

Thank you Lisa, I appreciate it but I still have some doubts,

How about if somebody worked in Wallmart for a week, it will have earned income from a week salary, but could benefit from using the 2019 earned income to get the EITC in 2020. How is this case different from having for example 550 earned income from a week salary in a year than 0 income? Sorry to ask.

ShoeBox Taxes

Level 5

Wow, that does sound like a major problem in the tax law to me.

Example: Take two people, "Bob" and "Joe," who have identical tax situations in 2019, allowing them the "sweet spot" of EIC. On New Year's Day 2020, Bob worked for 8 hours, but Joe did not, and then neither of them worked for the remainder of 2020. Bob gets $6k of EIC, and Joe gets didly squat? For 8 hours of work?

Dang, if I had a client like that, my ethics would be sorely tested on that one. "Are you SURE you didn't earn any income at all? Not even babysitting or something?"

T

TaxGuyBill

@athaureaux6 wrote:
This is my question: if somebody did not have any earned income at all, can they use the 2019 earned income anyway.

Maybe I'm misunderstanding this conversation, but if a person had $0 of Earned Income in 2020, and SOME Earned Income in 2019, YES, they can choose to use the 2019 Earned Income.

Is that what you are asking?

However, keep in mind that AGI may affect the credit, so just because they had Earned Income in 2019 doesn't necessarily mean they will qualify for a credit.

rbynaker

Level 13

Maybe I'm misunderstanding this conversation, but if a person had $0 of Earned Income in 2020, and SOME Earned Income in 2019, YES, they can choose to use the 2019 Earned Income.

I don't do EIC returns so I just figured there was something from the IRS that I missed. The law is surprisingly brief:

"If the earned income of the taxpayer for the taxpayer’s first taxable year beginning in 2020 is less than the earned income of the taxpayer for the preceding taxable year, the credits allowed under sections 24(d) and 32 of the Internal Revenue Code of 1986 may, at the election of the taxpayer, be determined by substituting
(1) such earned income for the preceding taxable year, for
(2) such earned income for the taxpayer’s first taxable year beginning in 2020."

sjrcpa

Level 15

So @ShoeBox Taxes 's example is correct. Wow.

I don't see many EIC returns either.

The more I know the more I don’t know.

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