EIC Worksheet Line 2 b error

[david3]

Single TP 40 years old meets the income qualifications to take the EIC. PS is calculating the EIC.

TP earned W-2 wages while in a half-way house. My understanding is the her W-2 income isn't considered earned income for the EIC.

I entered the W-2 wages on the EIC Worksheet in the A box below line 2a for the amount that isn't earned income for the EIC. The total wages populated line 2b, as it should, resulting in $0 earned income on line 6 and $0 EIC, which is correct.

However, there is an error for the total wages I entered in the A box below line 2a. The error says "spouse earnings should be blank". I don't see anywhere else to enter the non-earned income. 

Where do I enter the adjustment so that there is no earned income reported for the EIC?

Thank you.

[TaxGuyBill · Accepted solution]

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@david3 wrote:

I entered the W-2 wages on the EIC Worksheet in the A box below line 2a

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You entered it in the line that says "If married, and filing as Head of Household, any amount earned by your spouse ..."?

If you scroll down to J-a on the W-2 worksheet, there is a checkbox for work performed while an inmate at a penal institution.  IRS CCA 1998-049 stated that work at a halfway house is treated as working at a penal institution.

Interestingly, for many years Publication 596 specifically stated that work at a halfway house was the same as a penal institution.  However, in 2022 and 2023, that sentence was deleted.  I am unsure if there is a new ruling or why it was deleted.

[BobKamman]

It depends on what is meant by "halfway house," and whether this taxpayer was actually "confined" to one as it might have existed in 1998.  Could she have chosen probation instead, but had no place to go?  Was the halfway house operated by the government, or a nonprofit that also accepted residents who were not former prison inmates?  As Wikipedia notes, "The state-placement of ex-criminal offenders to a 'halfway house' after a prison sentence may either be decided upon as part of the judge's sentence or by a prison official's recommendation. A direct sentence to a halfway house can also be decided upon by a judge or prosecutor in lieu of prison time."

Facts and circumstances.  One size does not fit all.  There is nothing in the post that indicates she was ever in prison.  

[david3]

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@TaxGuyBill wrote:

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You entered it in the line that says "If married, and filing as Head of Household, any amount earned by your spouse ..."?

Yes, because the title in box for that line says "Amounts that are not Earned Income for the Earned Income Credit and...". There were no other lines with instructions on where to report income that doesn't qualify for the EIC. Like I said, it zeroed out the earned income but gave the error. I don't know why the instructions, or the error statement didn't say to enter that on the W-2 worksheet. Very poor instructions on how to get this done in PS.

Thanks for your help.

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[david3]

Thanks for your help, Bob.

The TP was never in prison/jail. So, her income WOULD qualify for the EIC.