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Many people had lower incomes during the pandemic in 2020 due to reduced work hours, layoffs, etc. Or they received unemployment benefits. These factors affect how much earned income credit and additional child tax credit you can get on your 2020 tax return and affect your 2020 refund.
There is a “lookback” option that allows you to use your 2019 amounts for earned income credit or child tax credit. You can choose whether to use your 2019 amount or your 2020 amount. Choose whichever amount gives you a better tax refund for your 2020 refund.
You can see this and choose in the earned income credit section in Deductions and Credits.
You still MUST enter all of your 2020 income into your 2020 tax return, including any unemployment you received.
Please follow these steps in TurboTax:
You need to have more than $2500 in earned income to claim the Additional Child Credit, so if you did not work at all in 2020, use your 2019 earned income. Unfortunately, the EIC factors in both AGI and earned income and you can only use the lookback for the earned income part. TurboTax will still use your 2020 AGI as part of the EIC calculation. And unemployment counts in your 2020 AGI. So, if you had a significant amount of unemployment, it could adversely affect the amount of your EIC credit.
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