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Common questions about Schedule EIC in ProSeries

by Intuit• Updated 11 months ago

Starting in tax year 2022:

In order to qualify for any amount of the Earned Income Credit, if the taxpayer doesn’t have a qualifying child, they must be 25-64 years old at the end of the year.
If filing MFJ, only one spouse needs to meet the age requirement.

Prior year information:

Starting in tax year 2021, the rules for Married Filing Separately taxpayers have changed:
- You can claim the EIC if you are married, not filing a joint return, had a qualifying child who lived with you for more than half of 2021, and either of the following applies:
  - You lived apart from your spouse for the last 6 months of 2021, or
  - You're legally separated according to your state law under a written separation agreement or a decree of separate maintenance, and you didn't live in the same household as your spouse at the end of 2021.
Starting in tax year 2021, if the taxpayer is unable to verify the identification requirements for children, the taxpayer is no longer fully disqualified for EIC. The taxpayer and spouse may still be able to claim the childless EIC requirements.
Starting in tax year 2021, the Investment Income Limitation has been increased from $3,650 to $10,000 and will be indexed for inflation in future years.
For tax year 2021 only: If the taxpayer doesn't have qualifying children, the age requirements have changed:
- You no longer need to be younger than 65 to claim EIC.
- In general, the minimum age for EIC is 19; however:
  - If you are a qualified homeless youth, or former foster youth, the minimum age for EIC has been decreased to 18.
  - If you are a specified student, you need to be at least 24.
For tax year 2021 only: if the taxpayer has no qualifying children, the amount of EIC and threshold phaseout amounts have increased.
Extended for tax year 2021: In the 2021 tax year the taxpayer may elect to use the 2019 earnings instead of the current year earnings to calculate EIC.
See IRS Pub. 596for full details.

Using the prior year earned income amounts for tax year 2020 or 2021 returns:

Earned Income Tax Credit (EITC) Relief:
If your earned income was higher in 2019 than in 2020 or 2021, you can use the 2019 amount to figure your EITC for 2020 and 2021. This temporary relief is provided through the Taxpayer Certainty and Disaster Tax Relief Act of 2020.

To elect to use the 2019 earned income amounts in ProSeries:

Press F6 to bring up Open Forms.
Type EICW and select OK.
Scroll down to the Prior Year Earned Income Election Smart Worksheet above line 6.
On line A check Yes and review the transferred amount on line B.
ProSeries will now use the 2019 Earned Income to calculate any Earned Income Credit amount.

What should I check in ProSeries if EIC is not calculating?

Earned Income Credit (EIC) is calculated based on the entries made throughout the program. If the return does not qualify for EIC, page 2 of the EIC Worksheet will list what disqualified the credit.

How can I suspend the EIC calculation?

The easiest way to suspend the calculation of EIC:

Open the Federal Information Worksheet.
Scroll down to Part IV- Earned Income Credit Information.
Check the box Taxpayer notified by IRS that EIC cannot be claimed in 20YY.

This will suspend the calculation of EIC without causing any other forms or worksheets to generate.

How to exclude Medicaid waiver payments from the EIC calculation:

Medicaid waiver payments for in-home support services are excludable from gross income and shouldn't be included in earned income.

If these payments are reported in box 1 of Form W-2, try to get a corrected Form W-2 from the payer first. If a corrected Form W-2 can't be obtained, follow one of these two steps:

Exclude these payments from the return:

Don't include this W-2 in the return. The IRS may contact the taxpayer to explain why the payments weren't included on the tax return. The taxpayer can explain that the payments are excludable from gross income under Notice 2014-7 as payments for in-home support services.

Don't enter the W-2 on the Form W-2 Worksheet:

If the Form W-2 has federal or state taxes withheld, enter these amounts on the Tax Payments Worksheet under line 18 as Other Withholding.

For more information, refer to the following IRS webpages:

What are the requirements for a dependent to qualify for the EIC?

In order for a dependent to qualify for EIC, they must be a qualifying child. This isn't the same requirement as the qualifying relative to be claimed as a dependent. A qualifying child for the EIC is a child who is your:

Son
Daughter
Stepchild
Foster child
Brother
Sister
Stepbrother
Stepsister
Half brother
Half sister
A descendant of any of the above (for example, your grandchild, niece, or nephew)

AND was

Under age 19 at the end of the tax year being filed and younger than you (or your spouse, if filing jointly)
Or under age 24 at the end of the tax year, a student, and younger than you (or your spouse, if filing jointly)
Or any age and permanently and totally disabled

AND

Who is not filing a joint return for the current tax year (or is filing a joint return for the current tax year only to claim a refund of withheld income tax or estimated tax paid)