Earned Income Credit calculation error

[xiao]

While filing my Form 1040, i noticed the Earning Income Credit computation is incorrect. Currently the online Turbotax is counting the Unemployment income as EARNED income, which is incorrect according to the regulation (Should be excluded).   Since COVID, we have many families that received Unemployment Income, this will greatly impact their tax returns. Thank you

[SweetieJean]

EIC is calculated on two bases: (1) based on earned income (unemployment is not included) and (2) AGI (unemployment is included).  You then get the lesser of the two.

When EIC was developed, it was intended to help offset payroll taxes for low and middle income working  families.  But it also uses AGI as a measure so that taxpayers who have earned income; but who also have other sources of income (investments, unemployment comp, retirement funds, etc.) do not unjustly benefit.

[xiao]

Thank you very much for your clarification! This make sense now.