Subchapter S Earnings - active participant - Is this not considered earned Income for Child Care credit?

[beckyc50]

Why does Subchapter S earnings not contribute to earnings for child tax Credit?

[abctax55 · Accepted solution]

"EARNED income" means subject to SE tax (in general).

K-1 income flowing from an S-Corp isn't.... sorta the reason ( or one of them...) for forming an S-Corp.

[Just-Lisa-Now-]

They should have a W2 from the S-Corp if they are doing work for it...the W2 would have earned income.

[abctax55]

"should"..... :smiling_imp:

[garman22]

I sometimes question this myself......

[qbteachmt]

"Active participant" = Employee = Wages = qualify for the Earned Income Credit, because W2 Wages = earned income. The amount on the K-1 is the amount passed through as taxable to the shareholder, not their Earned amount. Their Earned amount as part of payroll for the corporation was part of Expenses for the corporation.

[garman22]

That is a good definition. Thanks!!