Can I avoid being disqualified from the EITC for 10 years for wrongly claiming it in 2017?

[TaxGuyBill]

Why do you think you would be disqualified for 10 years?  Did the IRS determine you were fraudulent?

[kleonardson14]

Not yet. I recently received a CP2000 for my 2017 tax return because I did not report investment income (a mutual fund transferred to me when I turned 21 (2017). I did not understand how to manage the account at the time and when I did my taxes in TurboTax, I did not enter in the income properly.

Amending my return to reflect the income as investment income kicked me out of qualifying for the EITC. However, this all came after receiving the EITC again for 2018 (I reported my investment income correctly this year). So, I am wondering if there is any way to get on top of all of this and avoid being disallowed from claiming the EITC and potentially returning it for 2018 as well.

[Critter]

You can try requalifying by completing a form 8862 but it probably will not work ...  https://www.irs.gov/forms-pubs/about-form-8862

[Critter]

Are You Prohibited From Claiming the EIC for a Period of Years?

If your EIC for any year after 1996 was denied and it was determined that your error was due to reckless or intentional disregard of the EIC rules, then you can’t claim the EIC for the next 2 years. If your error was due to fraud, then you can’t claim the EIC for the next 10 years. The date on which your EIC was denied and the date on which you file your 2018 return affect the years for which you are prohibited from claiming the EIC. The following examples demonstrate which years you are prohibited from claiming the EIC.

Example 3—Cannot claim EIC for 2 years.

You claimed the EIC on your 2017 tax return, which you filed in March 2018. The IRS determined you weren't entitled to the EIC and that your error was due to reckless or intentional disregard of the EIC rules. In September 2018, you received a statutory notice of deficiency telling you an adjustment would be made and tax assessed unless you filed a petition with the Tax Court within 90 days. You didn't act on this notice within 90 days. Therefore, your EIC was denied in December 2018. You can’t claim the EIC for tax year 2018 or 2019. To claim the EIC on your return for 2020, you must complete and attach Form 8862 to your return for that year.

Example 4.

The facts are the same as in Example 3, except that your 2017 EIC wasn’t denied until after you filed your 2018 return. You can’t claim the EIC for tax year 2019 or 2020. To claim the EIC on your return for 2021 you must complete and attach Form 8862 to your return for that year.

Example 5—Cannot claim EIC for 10 years.

You claimed the EIC on your 2017 tax return, which you filed in February 2018. The IRS determined you weren't entitled to the EIC and that your error was due to fraud. In September 2018, you received a statutory notice of deficiency telling you an adjustment would be made and tax assessed unless you filed a petition with the Tax Court within 90 days. You didn't act on this notice within 90 days. Therefore, your EIC was denied in December 2018. You can’t claim the EIC for tax years 2018 through 2027. To claim the EIC on your return for 2028, you must complete and attach Form 8862 to your return for that year.

[kleonardson14]

Thank you. I never received a statutory notice of deficiency. Does this clarify what situation I would be in?:

I recently (April 2019) received a CP2000 for my 2017 tax return because I did not report investment income (a mutual fund transferred to me when I turned 21 (2017). I did not understand how to manage the account at the time and when I did my taxes in TurboTax, I did not enter in the income properly.

Amending my return to reflect the income as investment income kicked me out of qualifying for the EITC. However, this all came after receiving the EITC again for 2018 (I reported my investment income correctly this year). So, I am wondering if there is any way to get on top of all of this and avoid being disallowed from claiming the EITC and potentially returning it for 2018 as well

[Critter]

Amend to correct the issue ASAP.