topic Earned Income Tax Credit EITC in Deductions & credits

Earned Income Tax Credit EITC

IronRailroad — Tue, 09 Mar 2021 20:23:47 GMT

Already filed 2020 Taxes for my 17yr old Granddaughter. This is the first year she has filed on her own, not as a dependent. She had a AGI of under $17K, not married and no kids. TurboTax for Feds indicated she didn't qualify for EITC. However, TurboTax for the state of California indicates she qualified for EITC, not much but something. I've answered EITC questions both ways...she did receive a letter of disallowance from both Fed and State and ...she has never received a letter of disallowance from both Fed and State (that I'm aware of), which is actually how I answered the questions in TurboTax before filing. In both cases, TurboTax indicates she qualifies for EITC. Recently checking the State site for EITC Calculator the site indicates she doesn't qualify, which makes sense; especially for her age. Just received a letter from the CA. FTB disallowing some of her Tax Refund, that was initially indicated by TurboTax, for her NOT qualifying for EITC. Tried to go back in to TurboTax and see what went wrong but I cannot get TurboTax to NOT qualify her for EITC??? One other thing. The "Explanation of Changes" from the State states "We disallowed your Earned Income Tax Credit because you or your spouse/RDP exceed the age limit. (CODE: DH)

Re: Earned Income Tax Credit EITC

macuser_22 — Tue, 09 Mar 2021 20:39:31 GMT

Must be over age 25 to qualify for EIC (or under age 25 with a dependent child).

Re: Earned Income Tax Credit EITC

IronRailroad — Tue, 09 Mar 2021 20:50:30 GMT

Appreciate the response but if I'm not mistaken the age of 25 applies to Fed/IRS. My situation is related to the CA. FTB (State), which I believe in CA the age is 18. Knowing my Granddaughter is under 18 I can understand why CA FTB disallowed her the EITC but why does TurboTax keeping indicating that she does qualify? I filed her taxes with her receiving the CA EITC only to have it rejected. Does TurboTax have a bug?

Re: Earned Income Tax Credit EITC

macuser_22 — Tue, 09 Mar 2021 21:08:26 GMT

@IronRailroad wrote:

Appreciate the response but if I'm not mistaken the age of 25 applies to Fed/IRS. My situation is related to the CA. FTB (State), which I believe in CA the age is 18. Knowing my Granddaughter is under 18 I can understand why CA FTB disallowed her the EITC but why does TurboTax keeping indicating that she does qualify? I filed her taxes with her receiving the CA EITC only to have it rejected. Does TurboTax have a bug?

Interesting. CA age is 18, but I see nothing on the CA 3514 EIC form that indicated the age of the taxpayer. If there is nothing on the form to fill out then TurboTax will not ask the question. This may be CA's error for not putting a check box on the form to indicate age 18 or more.

But TurboTax probably should not even attach the form unless 18 or older.

Re: Earned Income Tax Credit EITC

IronRailroad — Tue, 09 Mar 2021 22:18:55 GMT

This is good appreciate the assist. Appears the answer is the lack of questioning by TurboTax for the age of the filer. Thought TurboTax would calculate, by the filer's birthdate that is provided during the initial gathering of the filer's "Personal Information", whether a filer met the qualifying criteria for CalEITC? I guess not??

Below is a excerpt from the CA Web Site Calculator to determine if a filer qualifies for CalEITC...

Check if you qualify for CalEITC

You may qualify for CalEITC if:

You’re at least 18 years old or have a qualifying child
You have earned income within certain limits

**********************************

Below is an excerpt from the Instructions for CA Form 3514...

Step 4 Filer Without a Qualifying Child

Is the amount on federal Form 1040 or 1040-SR, line 11 less than $30,001?
Yes Continue.
No Stop here, you cannot take the credit.
Were you (or your spouse/RDP if filing a joint return) at least age 18 at the end of 2020? ...

I suspect the age question is out there and that TurboTax does NOT have it programed into their code thereby leading to a filing error. The only two questions asked by TurboTax are what is on CA Form 3514...

Part I Qualifying Information See Specific Instructions.
1 a Has the Internal Revenue Service (IRS) previously disallowed your federal Earned Income Credit (EIC)? ..... □Yes □ No
b Has the Franchise Tax Board (FTB) previously disallowed your California EITC? ......................... □Yes □ No

Thereby, answering NO to both questions results in a 17yr old to qualify for CalEITC if the age isn't taken into consideration. However, even when I tried to indicate that she DID receive letters from both the IRS and FTB for being "...disallowed..." TurboTax still qualified her to receive CalEITC. One would think if she had received such letters TurboTax wouldn't allow her to qualify for CalEITC as additional forms may be needed.

I think, unless there is a better reason, it appears TurboTax does not have all the necessary criteria programed in their software to properly qualify for CalEITC. Looks like my Granddaughter won't be the only one this happens to. However, now when she does qualify, she will have to provide additional forms in order to obtain any EITC in the future...there is a penalty for filing for EITC when you aren't qualified to do so. Bummer!

Re: Earned Income Tax Credit EITC

macuser_22 — Tue, 09 Mar 2021 22:38:52 GMT

I doubt that this comes up very often because it is extremely rare for a 17 year old to provide more then half of their own total support for the year with their own money. ( I suppose can happen if the child received an inheritance or other money - but it is rare.)

Support includes food, housing (fair market rental value divided by number of occupants) and other living expenses..

See Worksheet 3-1. Worksheet for Determining Support
https://www.irs.gov/publications/p17#en_US_2020_publink1000171012

If the child meets the requirement of a dependent then the child CANNOT claim them self even if not claimed. Tax law does not allow that. That is why there are two question in the interview "CAN you be a dependent of another taxpayer?" and "WERE you claimed by that tax payer?" Both must be no to claim themself.

---Tests To Be a Qualifying Child---
(Must pass ALL of these tests)

NOTE: If a child passes all of these tests he must say “yes” on his/her own tax return (if he/she files one) that another taxpayer CAN claim him/her as a dependent even if they DO NOT claim him/her)

1. The child must be your son, daughter, stepchild, foster child, brother, sister, half brother, half sister, stepbrother,stepsister, or a descendant of any of them.

2. The child must be (a) under age 19 at the end of 2020, (b) under age 24 at the end of 2020 and a full-time student* for any part of 5 months of 2020, or (c) any age if permanently and totally disabled and must be younger than you (or your spouse if filing jointly).

3. The child must have lived with you for more than half of the year (There are exceptions for temporary absences such as school, illness, business, vacation, military service).

4. The child must not have provided more than half of his or her own support for the year.
See Worksheet 3-1. Worksheet for Determining Support
https://www.irs.gov/publications/p17#en_US_2020_publink1000171012

5. If the child meets the rules to be a qualifying child of more than one person, you must be the person entitled to claim the child as a qualifying child.

6. The child is not filing a joint return.

7. The child must be a U.S. citizen, U.S. resident alien, U.S. national, or a resident of Canada or Mexico

*A full-time student is a student who is enrolled for the number of hours or courses the school considers to be full-time attendance during some part of each of any 5 calendar months of the year.

See IRS Publication 17 for more information.

https://www.irs.gov/publications/p17