EITC, Earned Income Tax Credit, Questions and Answers
Here is a list of questions you frequently ask about EITC. Click or scroll down to find our answers:
EITC, Earned Income Tax Credit, is a benefit for working people who have low to moderate income. A tax credit means more money in your pocket. It reduces the amount of tax you owe and may also give you a refund.
EITC is also called EIC or Earned Income Credit.
Who can claim the credit and if I qualify, how do I get it?
To claim EITC on your tax return, you must meet all the following rules:
- You, your spouse (if you file a joint return), and all others listed on Schedule EIC, must have a Social Security number that is valid for employment and is issued before the due date of the return including extensions
- You must have earned income from working for someone else or owning or running a farm or business
- Your filing status cannot be married filing separately
- You must be a U.S. citizen or resident alien all year (If you are a nonresident alien married to a U.S. citizen or resident alien, see Publication 519, U.S. Tax Guide for Aliens)
- You cannot be a qualifying child of another person
- You cannot file Form 2555 or Form 2555 EZ (related to foreign earned income)
- You must meet the earned income, AGI and investment income limits (income limits change each year), see EITC Income Limits for the tax year amounts
- And you must meet one of the following:
- Have a qualifying child (see who is a qualifying child below)
- If you do not have a qualifying child, you must:
- be age 25 but under 65 at the end of the year,
- live in the United States for more than half the year, and
- not qualify as a dependent of another person.
If you qualify for EITC, you have to file a tax return with the IRS, even if you owe no tax or are not required to file.
IRS denied my EITC last year, but I qualify this year, what should I do?
If IRS denied or reduced your EITC for any year after 1996 for any reason other than a math or clerical error, you must qualify to claim the credit by meeting all the rules described above and you must attach a completed Form 8862, Information to Claim Earned Income Credit After Disallowance to your next tax return to claim EITC.
But, do not file Form 8862 if either (1) or (2) below is true.
1. After your EITC was reduced or disallowed in the earlier year:
- You filed Form 8862 (or other documents) and then IRS allowed, your EITC and
- IRS did not reduce or disallow your EITC again for any reason other than a math or clerical error.
2. You are taking EITC without a qualifying child and the only reason IRS reduced or disallowed your EITC was because a child listed on Schedule EIC was not your qualifying child.
Also, you cannot claim EITC or use the Form 8862 to claim EITC for:
- 2 years after IRS made a final determination to reduce or disallow your EITC due to reckless or intentional disregard of the EITC rules, or
- 10 years after IRS made a final determination to reduce or disallow your EITC due to fraud.
Who is a qualifying child?
Your child is a qualifying child if your child meets all of the following tests:
Your child must meet one of the following:
- Be under age 19 at the end of the year and younger than you or your spouse, if you file a joint return
- Be a full-time student in at least five months of the year and under age 24 at the end of the year and younger than you or your spouse, if you file a joint return
- Be permanently and totally disabled at any time during the year and any age.
To be your qualifying child, a child must be your:
- Son, daughter, adopted child, stepchild, eligible foster child, or a descendant of any of them (for example, your grandchild), or
- Brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant of any of them (for example, your niece or nephew).
Definitions to clarify the relationship test
Adopted child. An adopted child is always treated as your own child. This includes a child who was placed with you for a legal adoption by an authorized adoption agency
Eligible Foster Child. A person is your eligible foster child if the child is placed with you by an authorized placement agency, or by judgment, decree, or other order of any court of competent jurisdiction. Authorized placement agencies include a state or local government agency or an Indian tribal government. It also includes a tax-exempt organization licensed by a state or an Indian tribe.
Your child must have lived with you, or your spouse if you file a joint return, in the United States for more than half of the year.
Joint Return Test
Your child must not have filed a joint return or if your child filed a joint return, your child and his/or her spouse filed only to claim a refund and were not required to file.
See Publications 596, 596(SP) and 501 for more details
Who is an eligible foster child?
An eligible foster child is one placed with you by an authorized placement agency or by judgment, decree, or other order of any court of competent jurisdiction.
What is Earned Income?
Earned income includes all the taxable income and wages you get from working for someone else or you own or run a business or farm.
Taxable earned income also includes:
- Wages, salaries, and tips
- Union strike benefits
- Certain disability benefits received before you reach minimum retirement age
- Net earnings from self-employment
You can choose to include your nontaxable combat pay in your taxable earned income to get EITC. But, you have to include all or none of it. Make sure to check to see if including your combat pay as taxable income increases your refund or reduces the amount of tax you owe. If your spouse also has nontaxable combat pay, you can both choose which way is best for you. The amount of your nontaxable combat pay should be shown on your Form W-2, in box 12, with code Q.
How do I figure my credit?
After you know you qualify for EITC, you have two choices for figuring the credit:
- Have the IRS figure the credit for you. Follow the instructions for Line 64 a on Form 1040, Line 38a on Form 1040A, or line 8a on Form 1040EZ.
- Figure the credit yourself. To do this you must use the Earned Income Credit Worksheet (EIC Worksheet) in the instruction booklet for Form 1040, Form 1040A, or Form 1040EZ, and the Earned Income Credit (EIC) Table in the instruction booklet, or use the EITC Assistant Tool online. It is available in both English and Spanish.
For more information, see Figuring and Claiming the EITC, in Publication 596.
What if I am prohibited from claiming the EITC for a period of years?
If IRS denied your EITC for any year after 1996 and found your error was due to reckless or intentional disregard of the EITC rules, you cannot claim EITC for the next 2 years. If your error was due to fraud, you cannot claim EITC for the next 10 years. The date IRS denies your EITC and the date on which you file your tax return affects the 2 or 10 year time frame for when you are barred from claiming EITC.