EIC

[tomaszekx]

Hello,

Trying to files my taxes last minute and having a problem with EIC credit:

Been unemployed most of 2020 so my earned income is much lower than 2019.

According to IRS and Turbotax I can use my 2019 earned income numbers as long as it's lower than 2020, but when I do that It does allow me to take the credit, but credit is based on my unemployment pay and not last year earned income. Either I'm not understanding this correctly or Turbotax is not calculating this correctly.  I have even tested it by changing the numbers on my 1098-G for from the unemployment office.  As soon as I change the number to $1.00 on my 1098-G the EIC almost doubles. I thought unemployment income should not affect EIC number? Any quick help on it would be highly appreciated.

[Critter-3]

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.

As part of the COVID relief last signed two weeks ago, you can use the 2019 income if it of benefit to you...just follow the questions in TT.

From one of the TTX help pages explaining this:

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"Special Lookback for Earned Income Tax Credit and the Child Tax Credit

This is a very important provision which has the potential to help workers who experienced lower income in 2020, or received unemployment income in lieu of their regular wages, get bigger tax credits and larger refunds in the coming year.  

The special lookback rule will allow lower income individuals to use their earned income from 2019 to determine their Earned Income Tax Credit and the refundable portion of the Child Tax Credit in 2020, since their lower 2020 income could reduce the amount they are eligible for. 

The Earned Income Tax Credit is the country’s largest program for working people with low to moderate income. More than 25 million eligible tax filers received federal Earned Income Tax Credit last tax season and the average Earned Income Tax Credit was $2,476 per filer."

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https://blog.turbotax.intuit.com/tax-news/new-coronavirus-relief-package-passed-what-does-it-mean-fo...

[tomaszekx]

Thank you for getting back to me on it so quickly.

I understand about the "lookback" option and I'm using it to qualify for the EIC, but I don't understand why is TurboTax taking into account my unemployment pay from 2020? My understanding was that unemployment pay should not affect EIC amount and based on TurboTax calculations it clearly does, as if I change the number on my unemployment for year 2020 form 1098-G, it drastically changes my EIC.

(for example I change the number from $8000 to $1000 on my unemployment form 1098-g, it changes the EIC from $2356 to $4668). Why is the unemployment pay affecting the EIC allowance?

[Critter-3]

As I said in the private message ... look at the worksheet to see how it is calculated ... it uses the Earned income (from either the 2019 or 2020 returns which ever is greater)  &  AGI which includes the unemployment.  

You can peek at only  the Federal form 1040 and the summary of the state info by going here:

1) lower- Left side of the screen...click to the left side of the "Tax Tools" text selection.
2)  then select "Tools"
3) then select "View Tax Summary" from the pop-up
4) then back to the left-side and "Preview 1040"

Then hit the "Back" on the left side to get back to your tax entries.

To view your entire return using the online editions (including the state) before you file, you will need to pay for your online account.

To pay the TurboTax online account fees by credit card, without completing the 2020 return at this time, click on Tax Tools >>> Tools  and then Print Center.  Then click on Print, save or preview this year's return.  On the next page, to pay by credit card, click Continue.  On the next screen it will ask if you want Audit Defense, if you do not want this option just click on the Continue button.  The next screen will ask for all your credit card information so you can pay for the account.

[merymike]

Looking  for the credit amount tables.

[LeonardS]

This link 1040 TAX AND EARNED INCOME CREDIT TABLES (2021) has the IRS tax table for Earned Income Credit (EIC) that you will use when preparing your tax return.

Basic Qualifying Rules

To qualify for the EITC, you must:

• Have worked and  earned income under $57,414
• Have investment income below $10,000 in the tax year 2021
• Have a valid Social Security number by the due date of your 2021 return (including extensions)
• Be a U.S. citizen or a resident alien all year
• Not file Form 2555 (related to foreign earned income)