earned income credit

[kle2]

In 2022 I had to repay some 2021 income. When I went back into 2021 to adjust the income for the amount repaid to get a new tax liability (to compute claim of right credit) turbo tax is now showinga $900+ eic for 2021. Is there any ways to get this eic now?

[Cynthiad66]

No you should not amend your 2021 tax return to claim EIC.

I assume you are wanting to claim an EIC for 2021.  When you adjusted your 2021income in 2022 for a Claim of Right Repayment,  it seems that it made you eligible for the Earned Income Credit (EIC) for your 2021 tax return.   Remember, only the 2022 tax return was affected by the Claim of Right payment made so you do not qualify for the EIC on 2021.  EIC is computed based on income and the income on the actual 2021 return did not change.

A Claim of Right Repayment is a deduction you can take in the current tax year if you’re required to pay back income in excess of $3,000 from a previous tax year that you thought you could keep. You reported and paid taxes on the money, not knowing you’d have to pay it back.

@kle2

{Edited:  3/31/2023 | 8:37 AM PST}

[rjs]

If you follow the instructions in IRS Publication 525 for calculating the claim of right credit, the credit that you claim on your 2022 tax return will include the amount of the 2021 EIC.

[kle2]

Don't see any instructions about the eic when computing right of credit. I am readng the instructions as deducting the differences in the total tax between the 2 computations. The eic comes into affect later as a credit to the total tax. Are you saying I should "net" the eic into the claim of right credit?

[kle2]

2021 return is already filed. Don't have revised w-2, only a letter reporting the amount repaid. So not sure if I can file amended return. Thought only option was to compute claim of right credit on 2022 return. Would the new eic affect the amount of the claim of right credit?

[rjs]

Oh, I see what you mean about the EIC. And Pub. 525 isn't clear about exactly what it means by "your tax." You really want to compare the bottom line of the return, not just the total tax amount. So, yes, you should include the EIC in the credit amount. What happens if you compare Form 1040 line 34 or line 37 on the original and recalculated returns? That should take the EIC into account.

You are not supposed to get a revised W-2, and you do not file an amended return for 2021. The only way to deal with the repayment is to handle it on your 2022 tax return. You take either the claim of right credit, or an itemized deduction for the full amount that you repaid, whichever works out better.