EIC Credit for 2021 using 2019 income

[t231]

I am VERY confused. Does the IRS allow you to use 2019 earned income for the EIC credit if you have zero earned income for 2021? I have unemployment income for 2021, but not earned. It is not allowing me to efile with this scenario because it states I do not have a W2 etc listed for 2021. I am single, no dependents and I see so many different responses to this question. Please help! 

[Bsch4477]

Yes, you can use your 2019 earned income even though you had no earned income in 2021. 

[VolvoGirl]

Yes!  You can look back and use your 2019 income for the EIC credit instead of 2020 & 2021.   How to use the Lookback provision

https://ttlc.intuit.com/community/earned-income-credit/help/how-do-i-use-the-lookback-provision-to-m...

You can still use your 2019 earned income to get the EIC for 2021 even if you have no 2021 earned income.  See this post

https://ttlc.intuit.com/community/retirement/discussion/can-i-claim-the-eitc-this-year-using-the-loo...

[t231]

Thanks @VolvoGirl!

The software is saying I can not

efile because I have to show proof of earned income in 2021. This is quite frustrating, not sure what to do.

[LenaH]

When reading the language on the IRS website, it seems to indicate that there should be earned income for 2021. However, the tax professionals, as well as various software (including professional software), seem to interpret the wording as you do not need earned income in 2021 and that 2019 earned income will suffice. 

If you are still getting an e-file error, it would be helpful to have a TurboTax ".tax2021" file that is experiencing this issue.

You can send us a “diagnostic” file that has your “numbers” but not your personal information. If you would like to do this, here are the instructions: Go to the black panel on the left side of your program and select Tax Tools. 

1. Then select Tools below Tax Tools. 
2. A window will pop up which says Tools Center.  
3. On this screen, select Share my file with Agent. 
4. You will see a message explaining what the diagnostic copy is. Click okay through this screen and then you will get a Token number. 
5. Reply to this thread with your Token number. This will allow us to open a copy of your return without seeing any personal information.  

We will then be able to see exactly what you are seeing and we can determine what exactly is going on in your return and provide you with a resolution.

@t231 

[Edited 3/13/22 l 12:40PM PST]

[t231]

Thank you @LenaH 

So then I can NOT get the EIC credit for 2021. If I have zero earned income for 2021 then I am disqualified even if I have earned income in 2019. Is that correct?

And I assume the same rule applies to NY state? Again, this seems so confusing when I google this that I want to make sure I completely understand. 

[t231]

Thank you @LenaH 

So then I can NOT get the EIC credit for 2021. If I have zero earned income for 2021 then I am disqualified even if I have earned income in 2019. Is that correct?

And I assume the same rule applies to NY state? Again, this seems so confusing when I google this that I want to make sure I completely understand. 

[Bsch4477]

That is not correct. Even if you have no earned income in 2021 you can use your 2019 income to get the earned income credit on your 2021 return. 

[t231]

@Bsch4477  I am extremely confused because @LenaH said the exact opposite above in the thread.

Also, when you go on the IRS site and use the EIC Qualification Assistant it asks you about earned income for 2021, and if you do not have any, it states you do not qualify.

[Bsch4477]

I can appreciate that you are confused by conflicting advice. The IRS never states that you must have 2021 earned income, only that if your 2019 earned income is higher, you can use that. Obviously any earned income in 2019 is higher than zero in 2021. In the EIC qualification assistant use your 2019 amount when asked for your earned income.  That’s what the law allows. 

In TurboTax go to deductions and credits and click on eic and you will be asked “If your 2019 earned income is higher than your 2021 earned income of $0.0, you could get more for the EITC”

[VolvoGirl]

I've been looking and reading everything I can find.  

Looks like for 2021 you DO need to have some 2021 earned income. See IRS Pub 596 Eligibility Checklist on page 32. Step 6 says "Is your total earned income at least $1 but less than……."  And you have to answer YES to everything on the Checklist.

And page 2 Table 1 Rule 7 says you must have earned income.  See Rule 7 on page  8.

IRS Pub 596
https://www.irs.gov/publications/p596

[Bsch4477]

@VolvoGirl   Yes. Must have earned income, but that earned income can be from 2019. 

Election to use prior-year earned income.

You can elect to use your 2019 earned income to figure your 2021 earned income credit (EIC) if your 2019 earned income is more than your 2021 earned income. To make this election, enter the amount of your 2019 earned income on Form 1040 or 1040-SR, line 27c.

If you test TurboTax with a taxpayer with only unemployment income in 2021 and ask for EIC the program prompts you to enter the 2019 earned income acknowledging that the 2021 amount was zero. 

[VolvoGirl]

I don't know if Turbo Tax is doing it right but the election to use 2019 is to figure the credit.  That seems like it would be after you need to qualify for the EIC in the first place.

[Bsch4477]

You qualify if you have earned income. Since you are allowed to use 2019 earned income that qualifies you for the credit. This interesting aspect of the new law was taught in our VITA/TAXAIDE classes. 

[VolvoGirl]

I filled out a new return for Single with only 10,000 of unemployment. in my Desktop H&B program.    I said I had 13,000 of earned income for 2019 and it did give me the EIC based on 2019.    But I'm now thinking TT might be  wrong.    I've been telling people you could get the EIC with no income (and TT lets you) but now I'm rethinking it.   I don't know.  Seems iffy and a grey area.