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Lesson 30

Lesson 30. Earned Income Credit. Earned Income Credit. Purpose– reduce tax burden and supplement for the working low income. Refundable – can get more than you owe Maximum --$ 5666. Earned Income. “EARNED” Salaries, wages, tips and other taxable employee pay No inmate pay

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Lesson 30

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  1. Lesson 30 Earned Income Credit

  2. Earned Income Credit • Purpose– reduce tax burden and supplement for the working low income. • Refundable – can get more than you owe • Maximum --$5666

  3. Earned Income • “EARNED” • Salaries, wages, tips and other taxable employee pay • No inmate pay • Page H-1 Resource Guide

  4. Investment Income • Interest and Dividends • If more than $3,100 –no EIC • Eligibility Rules pg H-3

  5. Advanced EIC • Not available in 2011 ---2010 is last year • Must have one child • Must complete W-5 • Box 9 on W-2 • Must file if you receive • Adds to the amount you owe

  6. Where reported • EARNED INCOME CREDIT • Resource Guide pg 6-1 line 66a(1040) • Page 16 Line 41a 1040A instructions • Page 12 Line 9a 1040EZ instructions • ADVANCED EIC • Resource Guide pg 6-1 line 61 • 1040A Line 36 • 1040EZ can’t use – have to have a child

  7. Who gets itResource Guide pg H-2 • Must have SS# • Must be a citizen or resident alien • Cannot be a qualifying child • Cannot be MFS • No Form 2555 (Foreign earned income) • No investment income over $3,100

  8. If you have a child • Must be a qualifying child • Child can only be claimed by one person • Isn’t parent then qualifying child • If both use the kid than whom the child lived the longest • Highest AGI will get the EIC for debates

  9. Adopted Child • Must have SS #. Can file amended when rec’d

  10. If you don’t have a child • 25-65 • Not a dependent • 6 months or more in USA

  11. Income Limitations

  12. Both Earned Income and Adjusted Gross Income must be below the maximum amount.

  13. Disallowance • Can be denied due to reckless or intentional disregard – 2 years • If fraud – denied for 10 years

  14. Let’s review • Page 30-4 Exercises • Example pg 30-4 • Page 30-6 Exercises

  15. Determine the amount of EIC • EIC Tables

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