If a taxpayer's Earned Income Credit (EIC) was disallowed, the additional step they must take the next time they claim the EIC is to file Form 8862. This form is used to claim the Earned Income Credit after it has been disallowed in a prior year.
If a taxpayer's Earned Income Credit (EIC) was disallowed, what additional step must the taxpayer take the next time they claim the EIC?
Amend the previous year's tax return.
Complete Form 8812 (Form 1040).
File a grievance with the IRS.
File Form 8862.
11 answers
If a taxpayer's Earned Income Credit is disallowed due to reckless or intentional disregard of the rules, there is a waiting period after the disallowance. How long is the waiting period?
Sixty to ninety days.
Six months to one year.
Two to ten years.
Fifteen to twenty years.
Sixty to ninety days.
Six months to one year.
Two to ten years.
Fifteen to twenty years.
If a taxpayer's Earned Income Credit (EIC) is disallowed due to reckless or intentional disregard of the rules, the waiting period before they can reclaim the EIC is two to ten years.
Which of the following taxpayers qualifies for the Earned Income Credit? (All are U.S. citizens, lived in the United States for more than six months, and have valid social security numbers that allow them to work. They did not have any foreign income and will not file Form 2555, Foreign Earned Income.)
Abbey (28) is filing as a single taxpayer with no dependents. Abbey's earned income and adjusted gross income in 2023 was $23,800, all from wages. She had no other income.
Alex (27) is filing as a single taxpayer with no dependents. Alex's earned income and adjusted gross income in 2023 was $13,500, all from wages. He had no other income.
Derek (38) and Serena (39) are married, filing a joint return. Derek's income from wages was $22,700. Serena's income from wages was $31,600. They had no other income in 2023. Derek and Serena had their first child, Caleb, in December 2023.
Romeo (29) and Suzie (39) are married, filing a joint return. Romeo's income from wages was $20,800. Suzie's income from wages was $42,600. They had no other income in 2023. Romeo and Suzie have three qualifying children (ages 3, 6, and 9).
Abbey (28) is filing as a single taxpayer with no dependents. Abbey's earned income and adjusted gross income in 2023 was $23,800, all from wages. She had no other income.
Alex (27) is filing as a single taxpayer with no dependents. Alex's earned income and adjusted gross income in 2023 was $13,500, all from wages. He had no other income.
Derek (38) and Serena (39) are married, filing a joint return. Derek's income from wages was $22,700. Serena's income from wages was $31,600. They had no other income in 2023. Derek and Serena had their first child, Caleb, in December 2023.
Romeo (29) and Suzie (39) are married, filing a joint return. Romeo's income from wages was $20,800. Suzie's income from wages was $42,600. They had no other income in 2023. Romeo and Suzie have three qualifying children (ages 3, 6, and 9).
To determine who qualifies for the Earned Income Credit (EIC), we need to consider the eligibility criteria, which include factors such as filing status, earned income, adjusted gross income (AGI), and the presence of qualifying children.
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Abbey (28, Single, No Dependents): Abbey's AGI and earned income of $23,800 exceeds the limit for single filers with no children (which is $17,640 in 2023). Therefore, Abbey does not qualify for the EIC.
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Alex (27, Single, No Dependents): Alex's AGI and earned income of $13,500 is below the limit for single filers with no children. Therefore, Alex qualifies for the EIC.
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Derek (38) and Serena (39, Married Filing Jointly, No Dependents): Their total AGI is $22,700 (Derek) + $31,600 (Serena) = $54,300. This exceeds the limit for married couples filing jointly with no children ($23,920 in 2023). Therefore, they do not qualify for the EIC.
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Romeo (29) and Suzie (39, Married Filing Jointly, Three Qualifying Children): Their total AGI is $20,800 (Romeo) + $42,600 (Suzie) = $63,400. This is above the limit for married couples filing jointly with three qualifying children ($53,057 in 2023), so they do not qualify for the EIC.
In summary, the taxpayer who qualifies for the Earned Income Credit is:
- Alex (27), who earned $13,500 and has no dependents.
Drake would like to claim his grandson, Spencer, as his qualifying child so he can claim the Earned Income Credit (EIC). However, Spencer's mother, Alma, is also eligible to claim Spencer as her qualifying child for EIC purposes. As Drake's tax preparer, what information would you share with Drake?
Alma holds a higher right and may claim EIC based on Spencer, because Alma is Spencer's parent.
As long as Drake files before Alma, he may claim EIC based on Spencer, his qualifying child.
Drake and Alma may agree to each claim one-half of the EIC based on Spencer, their qualifying child.
Drake may claim EIC based on Spencer if his adjusted gross income is higher than Alma's.
Alma holds a higher right and may claim EIC based on Spencer, because Alma is Spencer's parent.
As long as Drake files before Alma, he may claim EIC based on Spencer, his qualifying child.
Drake and Alma may agree to each claim one-half of the EIC based on Spencer, their qualifying child.
Drake may claim EIC based on Spencer if his adjusted gross income is higher than Alma's.
The correct information to share with Drake is:
Alma holds a higher right and may claim EIC based on Spencer, because Alma is Spencer's parent.
In the case of multiple eligible claimants for a qualifying child, the IRS has specific rules. Generally, the child's parent has the highest priority to claim the Earned Income Credit. Since Alma is Spencer's mother, she has the primary right to claim the EIC based on Spencer, regardless of the adjusted gross income or who files first.
If a taxpayer has investment income that exceeds a certain threshold, they are not eligible to claim the Earned Income Credit. For 2023, what is that threshold?
For the tax year 2023, the threshold for investment income that disqualifies a taxpayer from claiming the Earned Income Credit (EIC) is $11,000. If a taxpayer's investment income exceeds this amount, they are not eligible to claim the EIC.
Frances (63) shared a home all year with her son, Antonio (41), and Antonio's son, Danny (23). They were all U.S. citizens, lived in the U.S. all year, and all had social security numbers valid for employment. Frances and Antonio worked full-time. Danny was a part-time student during the year; he took one class at the local community college. Danny also worked part-time and had wages of $6,800. No one else lived in the home. Frances had earned income and an adjusted gross income of $23,459. She had no foreign income or investment income. Antonio had earned income and an adjusted gross income of $32,500. He had no foreign income or investment income. Who, if anyone, is eligible to claim and receive the Earned Income Credit?
To determine eligibility for the Earned Income Credit (EIC), let's analyze the information regarding Frances, Antonio, and Danny:
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Frances (63):
- Frances has earned income and an adjusted gross income (AGI) of $23,459.
- As a taxpayer with no dependents and an AGI under the threshold for a single taxpayer, Frances may qualify for the EIC, but only if she has a qualifying child.
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Antonio (41):
- Antonio has earned income and an AGI of $32,500.
- Like Frances, Antonio's AGI is below the threshold for claiming EIC for an individual without qualifying children, but he also needs to have a qualifying child to claim the EIC.
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Danny (23):
- Danny has wages of $6,800, which is considered earned income.
- He is a part-time student, but at 23, he does not qualify as a child for EIC purposes when it comes to either Frances or Antonio as he is over the age limit of 19.
To claim EIC, a taxpayer must have qualifying children residing with them, and a qualifying child must meet age criteria and other requirements:
- A qualifying child must be under age 19 at the end of the year or under age 24 if a full-time student.
- However, they must also not be claimed as a dependent by someone else.
In this scenario:
- Since Frances and Antonio are both adults (above age 24) and Danny does not meet the criteria to be a qualifying child for either Frances or Antonio due to his age (he is over 23), neither Frances nor Antonio is eligible to claim the Earned Income Credit.
Thus, no one in this household is eligible to claim and receive the Earned Income Credit for the year.