Earn Income Tax Credit for 2020 - Pandemic adj

[boomrock204]

Hi,

As I'm aware that you can use your earned income in 2019 to determine eligibility for EITC but no where in Turbo Tax software guidance me to where I need to do that. My mom is unemployed since March last year with income of $2k and unemployment benefit of $16k. Now Turbo Tax software is saying that she doesn't qualify for EITC because her income is too high. Her income for 2019 is only $9k. Please advise how do I go about adjusting that from the software

From Turbo Tax: "There is a special temporary rule allowing individuals to use their earned income from tax year 2019 to determine their eligibility and amount of Earned Income Tax Credit and the refundable portion of the Child Tax Credit (i.e., the Additional Child Tax Credit) in the 2020 tax year. TurboTax will help you to do this when you file your 2020 tax return this year."

[npierson7]

In fact, her income in 2020 is too high for Earned Income Tax Credit, maximum AGI for single person for that credit is $15,820. If she has dependents, she would be qualified. And the option to use 2019 income for the credit doesn't apply to her, because her 2020 income was higher than in 2019. 

You can find more information here:

Earned Income and Earned Income Tax Credit (EITC) Tables

[boomrock204]

Hi,

Thank you for the response. Quick question about that though. Her 2019 earned income is 9k which is greater than her 2020 earned income of 2k. Her 16k unemployment benefit which is taxable but is not considered as earned income. Therefore, she should be qualified for the EIC tax credit, right?

I was on the phone earlier with TurboTax support but she doesn’t quite sure how to fix it when we even switches to Form (instead of step by step) and check off on the option saying yes to use last year but nothing changed. The step-by-step doesn’t even ask for that question. 

Source: 
Election to use prior year earned income. You can elect to use your 2019 earned income to figure your 2020 earned income credit (EIC) if your 2019 earned income is more than your 2020 earned. 

The IRS defines “earned income” as the compensation you receive from employment and self-employment. Specifically excluded from this definition is any unemployment compensation you receive from your state.

[DawnC]

The lookback provision may not help in a situation where you received a large amount of unemployment.  This is because the Earned Income Credit uses both numbers to calculate the credit.  If she had not received the UE and had a decrease in earned income, the provision would help.  But the EIC also uses AGI to figure the credit.    The lookback provision only allows you to use 2019 earned income amount, but when figuring the credit, you must use your 2020 AGI.   

[boomrock204]

This situation may affect most people who receive unemployment benefit since those unemployed get federal enhancement $. Therefore, the unemployment amount is big while their base benefit is only $100sth/week. 

I saw this on the news and it states below but not sure how it could apply to mom’s case- 
“You can get a 15 percent deduction under the Earned Income Tax Credit. Someone with no children could earn up to $21,370 and a married couple with three children could earn up to $55,952 and still qualify. Unemployment benefits don't count as earned income.

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