How do i use my 2019 income to qualify for the earned income credit this year due to being on unemployment all year?

[ErnieS0]

Yes you can use 2019 earned income instead of 2020 income to compute the child tax credit.

To do this in TurboTax:

• In Search, type earned income credit,
• Click Jump to earned income credit,
• Answer the questions until you reach Do you want to use last year’s earned income?
• Click Yes and enter your 2019 Earned Income.

If your earned income was higher in 2019 than in 2020, you may get a higher EITC credit by using 2019 earned income. Try it both ways in TurboTax and see what works best for you.

For more information see Earned Income Credit.

[HannahS]

If I choose to use my 2019 income instead of 2020, am I going to end up having to pay back what I get for a EIC this year? Is there any risk to doing it this way? @ErnieS0 

[LinaJ2020]

No, you do not need to pay back what you get for EIC if you chose to use 2019 earned income. This is supposed to be a temporary relief provided through the Taxpayer Certainty and Disaster Tax Relief Act of 2020.

If your earned income was higher in 2019 than in 2020, you can use the 2019 amount to calculate your EITC for 2020.  For more information, click here: EIC

@HannahS

[SergioNJ]

Turbotax doesn't "allow" me to select 2019 income for EIC, it simply says the following for 2020 (yet my AGI for 2019 WOULD qualify us for the EIC since we received it last year) how do we get the program to ask us which year we want?:

"It turns out you don't qualify for this credit

That's OK. We'll keep looking for other tax breaks for you.

Why is my adjusted gross income too high?

Your adjusted gross income of $xxxxx is at or above the limit of $53,330 when filing as Married Filing Jointly with 2 children who count for this credit."

So again, how do we get the program to ask us which year we want?

Thanks for sharing your knowledge.

[JohnW152]

In your case, your 2020 Adjusted Gross Income (AGI) is too high, so you don’t qualify for EIC, whether you use your 2019 or 2020 earned income.  That’s why the program isn’t giving you the option.

The Earned Income Credit for 2020 is computed by comparing two amounts in the IRS's EIC table -- an amount based on earned income – which can be from either 2019 or 2020 -- and an amount based on your 2020 AGI.  Whichever of these two amounts from in the table yields the smaller EIC amount will be used.

Here, your AGI is too high, so it doesn’t matter which year you use for earned income.

Please see Worksheet A -- 2020 EIC -- Line 27 in 2020 Instructions for Forms 1040 and 1040-SR to see how the computation works.

[SergioNJ]

@JohnW152 
Thanks John. I actually was reading about it after I posed the question and saw that on the IRS site, but I still appreciate your clear and concise response.

One thing they didn't consider when enacting the relief for self-employed folks is that you can't reduce your "gross" unemployment earnings (even if they did "replace" most of the lost "gross" earnings of 2020) with typical and constant self-employed expenses. So either way we (the self-employed) miss out on several thousands of $ from the EIC because the AGI remains too high in 2020 vis-à-vis 2019.

On the "plus" side they did allow for self-employment family leave which helped with a couple of grand and now the "possibility" exists of not taxing 2020 unemployment benefits on the federal level (different topic for another thread).

Thanks again.

[jaquino91191]

Should I update the 2019 income to adjust my credits, even though I am waiting for the IRS to adjust my 10200 unemployment tax break? Should I wait for the IRS to adjust this first and then amend it to use my earned income from 2019? Or can I do that now, and then wait for the IRS to adjust the unemployment tax break?

[Cynthiad66]

The Taxpayer Certainty and Disaster Tax Relief Act of 2020 has a “lookback” provision that allows you to use your 2019 earned income instead of your 2020 earned income to calculate the Earned Income Credit (EIC) or Additional Child Tax Credit (ACTC) on your 2020 tax return if doing so makes the credit larger. This will help you get a larger credit amount if your income was reduced in 2020 due to unemployment or other reasons.

Follow these steps to see if recalculating your earned income credit using your 2019 earned income would benefit you.

Note: Your return should be complete before you go through this comparison process. If you add income or dependents after doing the comparison, the results can change.

1. Open (continue) your return if you don't already have it open.
2. Take note of your current refund or payment due amount. (Your return should include all your information before starting this comparison.)
3. Search for EIC and select the Jump to link at the top of the search results. 
4. Answer Yes on the Did my earned income decrease in 2020? screen and Continue. 
5. Answer the onscreen interview questions until you get to the Do you want to use last year's earned income? screen. 
6. Answer Yes and enter your 2019 earned income from last year's tax return to determine how much you will receive. 
7. Compare the new refund (or payment due) amount using your 2019 earned income with the previously noted refund or payment due amount using your 2020 earned income.
8. Continue with the onscreen interview questions until complete.

Related Information:

• What are the qualifications for the Earned Income Credit (EIC or EITC)?
• What is the Child Tax Credit?
• What is unearned income?
• What is earned income?
• What is a qualifying child for the Earned Income Credit (EIC) in 2020?

[t231]

Are you able to use 2019 W2 income for the EITC credit for tax year 2021 IF you only have unemployment income for 2021? It is not letting me file electronically because it is stating I have no W2 income for 2021. I am very confused as to what to do

[PattiF]

Unfortunately, unemployment is not earned income.  The American Rescue Plan of 2021 has a “lookback” provision that allows you to use your 2019 earned income instead of your 2021 earned income to calculate the Earned Income Credit (EIC) or Additional Child Tax Credit (ACTC) on your 2021 tax return if doing so makes the credit larger.

Here is a TurboTax help article with instructions to use the lookback provision.