Using 2019 income to calculate 2020 EITC

[Pressley]

I read the below information but still unclear:

"Earned Income Tax Credit (EITC) Relief. If your earned income was higher in 2019 than in 2020, you can use the 2019 amount to figure your EITC for 2020. This temporary relief is provided through the Taxpayer Certainty and Disaster Tax Relief Act of 2020."

I don't understand why a higher income would result in a higher EITC. I thought the higher your income, the lower the EITC.

I earned less in 2019 and received a higher EITC. My income for 2020 is higher and TurboTax shows a lower EITC.

Please help explain.

Thank you.

[MinhT1]

The Earned Income Tax credit (EITC) is a bell shaped curve against income. The EITC rises with income until a certain level of income when it starts to decrease to reach 0 at the maximum level of income for the category.

As an example, please look at the EITC tables from page 31 of this IRS publication.

[aireka1]

How do I find out if I used my 2019 income to calculate my earned income credit for 2020? My refund was filed in Jan but it is still processing. When I checked my transcripts on the IRS website the earned income was lower than what TP calculated. It also appears to be calculating based on the earned income amount - minus the unemployment. But my adjusted gross income is higher than the earned income. I can't remember if I selected to use my AGI from 2019 or if this is something TP automatically selected for me? If not, can I amend my tax returns and take this relief credit?

[CatinaT1]

When you look at your return, if you used the prior year earned income you will see "PYEI" and the amount of your 2019 earned income on the dotted line next to line 27 on your Form 1040.

Unemployment is not earned income, it is unearned income and not used in calculating your earned income tax credit.  This provision allows for use of your 2019 earned income if it is higher than your 2020 earned income.  This is something you must elect, it is not automatic.

If you did not take advantage of this benefit when you originally filed your return, you can amend to make the adjustment.

[aireka1]

Thank you. I see that on my return. Thanks for explaining! 

[aireka1]

Hello, the IRS did not correct my return. Their system did not recognize the PYEI on my return and only sent the lower amount. I have been trying to get in touch with someone at the IRS but I keep being bounced around. This mistake has lowered my return significantly. I have been trying to get this fixed for two weeks. They sent my refund to my bank account yesterday and it was not the correct amount. 

[Irene2805]

You should contact the IRS on the status of your return.  To contact the IRS, please review the steps and information below:

IRS Support Number: (800) 829-1040

To reach a live agent at the IRS support number, follow these steps:

1.      Select your preferred language.

2.      Press 2 for “Personal Income Tax”

3.      Press 1 for “Form, Tax History, or Payment”

4.      Press 3 for “All Other Questions”

5.      Press 2 for “All Other Questions”

6.      Do not enter your SSN or EIN. It will ask you twice; do not enter anything.

7.      Press 2 for “Personal or Individual Tax Questions”

They are available Monday through Friday, from 7:00 a.m. to 7:00 p.m. local time (Alaska & Hawaii follow Pacific Time).

Here are some additional resources you can try:

1. Contact a local IRS office.  Click this link for contact information:  Contact Your Local IRS Office
2. The Taxpayer Advocate Service (TAS), which is an independent organization within the IRS. Click this link  Taxpayer Advocate Service (TAS)

@aireka1