It depends. Did the IRS adjust your return using the math error procedures? or was this the result of an audit? What was the explanation provided?
Income or loss from a partnership is reported on your individual return based on the types of income represented.
From IRS Publication 596:
Earned income includes all of the following types of income.
- Wages, salaries, tips, and other taxable employee pay. Employee pay is earned income only if it is taxable. Nontaxable employee pay, such as certain dependent care benefits and adoption benefits, isn't earned income. But there is an exception for nontaxable combat pay, which you can choose to include in earned income, as explained later in this chapter.
- Net earnings from self-employment.
- Gross income received as a statutory employee.
Other types of earned income not reported on Form W-2, in box 1, include household employee wages, tip income not reported to your employer, certain Medicaid waiver payments if you choose to include nontaxable payments in earned income for purposes of claiming the EIC, taxable dependent care benefits, employer-provided adoption benefits from Form 8839, wages from Form 8919, and other earned income. You should report these on Form 1040 or 1040-SR, lines 1b through 1h.
Examples of items that aren't earned income include interest and dividends, pensions and annuities, social security and railroad retirement benefits (including disability benefits), alimony and child support, welfare benefits, workers' compensation benefits, unemployment compensation (insurance), nontaxable foster care payments, and veterans' benefits, including VA rehabilitation payments. Don’t include any of these items in your earned income.
There is a limit of $11,000 on investment income in order to be eligible. The investment income worksheet includes income and losses from passive activities on Schedule E.
Whether partnership income/loss counts for EITC may depend on how the income was categorized.
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