Earned Income Credit

[rose323]

I have a client stating they are allowed to take 2019 earned income credit if they only received unemployment all year for their 2020 return is this correct? There is a form her friend's tax preparer added to claim the same EIC for 2019 for 2020 as well ??? 

[Just-Lisa-Now-]

2019 earned income look back its on the EITC worksheet.

[IRonMaN]

Take a look through the EIC related forms in the software ------------------  I think you might be able to come through for your client.

[rose323]

I see now does this only qualify for someone who has had unemployment all year or to someone that has had employment plus a w2

[Just-Lisa-Now-]

as long as your earned income in 2019 is higher than your earned income in 2020, it applies.

[rose323]

I have earners with 30k plus unemployment for 20k do they qualify as well or only those who have only received unemployment all year

[sjrcpa]

Read Lisa's answer.

[rose323]

just seen it

[rose323]

Thank you Lisa ! 

[rose323]

sorry ok just to make sure 2019 my customer earned income was 25,233.... for 2020 it was 26,242 unemployment so he would not qualify correct ? 

[sjrcpa]

unemployment is not earned income for EITC purposes.

[Just-Lisa-Now-]

I haven't had any clients that qualify come in yet though, but theoretically thats how it should work, assuming they meet all the other qualifications for EITC.

[BobKamman]

Unemployment is not earned income.  So he does qualify, using 2019 earnings.  

[rose323]

To my understanding, it is earned income through the eyes of the IRS since it is compensation. I'm a bit confused now. Just doesn't qualify for the credit. So I'm a bit confused now. 

[Just-Lisa-Now-]

Is their earned income (what they earned working, not unemployment) higher in 2019 than in 2020?

[rose323]

No for 2019 it was 25k in w2 forms, and in 2020 it is 26k for unemployment

[Just-Lisa-Now-]

So the answer is yes, 2019 earned income is higher than 2020 earned income (unemployment is NOT earned income)

But unless they have a dependent child, their 2019 earned income is too high to qualify for EIC anyhow.

[rose323]

For 2019 they worked all year, for 2020 there was only unemployment

[rose323]

Ok, thank you I appreciate it. So pretty much it would be rare for someone to qualify since last year's earned income will most likely be higher. Thank you for clarifying 

[rose323]

I meant to say that since his earned income is higher than this year he does qualify. Thank most people if they have dependents will likely qualify 

[Just-Lisa-Now-]

Just depends on the situation and the income. Its not one size fits all. Sometimes the higher 2019 income will be too high and not help.

[rose323]

I have a headache now 😞 cuz I already filed some of my customers and how no idea about this credit 😞

[Just-Lisa-Now- · Accepted solution]

Its always a good idea to take an update class near the end of December or early January just to get caught up on all the new things for the year.

[rose323]

Yes, I will definitely do that this year, Thank you I actually checked my returns and 6 out of 50 returns already filed qualified. I will make sure to amend there return so they can receive there credits at no cost. Thank you I appreciate your help ! 

[Just-Lisa-Now-]

So not too much extra work and will go a long way toward client appreciation! Happy clients send referrals!

[BobKamman]

A good lesson in not e-filing until IRS starts accepting returns.   Don't file the amended returns until the original has been processed, otherwise both refunds may take six months.  

[rose323]

Ok will do Thank you 

[qbteachmt]

I hope this helps: "for 2020 there was only unemployment"

We had a great comment here (to paraphrase): $0 is less than any other amount of earned income.

It might help if you drop the consideration of Unemployment entirely. The EITC lookback has nothing to do with Unemployment. It isn't "only my clients with unemployment" but that seems to be what you are using in your analysis.

It simply needs you to identify is Less Earned Income in which year?

Stop worrying about how Unemployment fits into this, because it doesn't apply at all. The tax payer can have had no unemployment funds, and you still do the analysis.

Don't forget your IRS resources:

https://www.irs.gov/newsroom/eitc-awareness-day-critical-tax-credit-provides-a-significant-refund-bo...

https://www.irs.gov/credits-deductions/individuals/earned-income-tax-credit-eitc

https://www.irs.gov/credits-deductions/individuals/earned-income-tax-credit/who-qualifies-for-the-ea...

[rose323]

Hi Ms. Lisa, so entered the worksheet for my client and the software is giving me an error message saying that I can not file electronically due to EITC being documented from undocumented sources. Any way around this issue? 

[qbteachmt]

There are topics here for that error message when there was a Sched C with business loss, and when the 1040 had no taxable income ($0). Is that something you have?

[rose323]

No schedule c, only unemployment which makes income correct as zero 0

[qbteachmt]

"which makes income correct as zero 0"

To Efile, I saw someone mentioned putting $1 interest as Other Income with the comment "interest to efile."

[qbteachmt]

I found it:

"It is worth mailing it if is big difference, but Intuit says they are working on it, or at least an employee reported the problem to the programmers. If I get a case like yours, I am planning to put a 1 dollar as interest and attach a PDF sign that reads "Interest for Efiling purposes ONLY". But I hope they fix it."

[rose323]

Oh yes ya know i remember someone saying to add 1.00 for interest income! Awesome i will do that 

[rose323]

Just tried a 1.00 on interest income and no luck. Yes it's definitely worth it receiving 3300 instead of 839.

[Just-Lisa-Now-]

Im under the impression (I saw it posted somewhere) that the zero earned income in 2020 thats disallowing Efiling is a program glitch that 'should' be fixed at some point.

[BobKamman]

But wouldn't the unemployment income get around the problem of zero AGI?

[BobKamman]

Remember the IRS motto:  "We're from the government, and we think you cheat."

I doubt this is an Intuit "programming problem."  What's likely, is that IRS has told Intuit, "don't send us any returns with unverified earned income."  IRS has a "programming problem" until it agrees to accept returns claiming earned income in 2019, even with none in 2020.  If enough practitioners storm IRS Taxpayer Advocate and Congress to demand an immediate fix, maybe the problem will be resolved in a month or two.  Peacefully, of course.  

[qbteachmt]

I remember that one of our "previously all stars" mentioned TurboTax is also having this issue and that's how he saw it is planned to be resolved.