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gunmama1142
New Member

I'm at a section asking me "do you want to use last years earned income". What do I do here and why am I being asked this?

 
13 Replies
MinhT1
Expert Alumni

I'm at a section asking me "do you want to use last years earned income". What do I do here and why am I being asked this?

The lookback rule is part of the Coronavirus tax relief package.

 

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.

 

Please read this TurboTax blog for more information.

 

To use the lookback feature in TurboTax Online, go to the Earned Income tax credit section.

 

  1. In the Search box on the top right of your screen, enter earned income tax credit and click on Find at the right
  2. In the search result box, click on Jump to earned income tax credit
  1. In this section, follow the interview until you arrive at a page titled Do you want to use last year's earned income? Note down your Earned Income tax credit using your 2020 earned income.
  1. Click on the radio button Yes and enter your 2019 earned income and click Continue
  2. TurboTax will give you your new Earned Income tax credit using your 2019 earned income
  3. If the new credit is higher, click Continue to accept it
  4. If the new credit is lower, click Back to go back to the previous screen and click the radio button No then click Continue.
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icecole29
New Member

I'm at a section asking me "do you want to use last years earned income". What do I do here and why am I being asked this?

once I did all the using 2019 earned income credit for 2020, Turbo tax won't let me e-file now????

icecole29
New Member

I'm at a section asking me "do you want to use last years earned income". What do I do here and why am I being asked this?

Are you still able to efile? I am unable to e-file after I do this.

StratigosA08
Level 1

I'm at a section asking me "do you want to use last years earned income". What do I do here and why am I being asked this?

An important clarification from IRS Pub 596, Page 18, states:

 

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 income. "

 

SO, if your 2020 earned income is too high for the EITC, then necessarily you will not be able to use your 2019 Earned income amount since it MUST be greater than 2020 to be an option. In other words, this provision only allows EITC eligible taxpayers to receive more of an earned income credit if their prior year income results in a greater credit. It does not give you a second chance to be eligible for it based on last years income. 

 

So for those customers who see "you are not eligible" it is a moot point because a higher amount from a prior year will not help you.

annel84
New Member

I'm at a section asking me "do you want to use last years earned income". What do I do here and why am I being asked this?

where do I find no taxable combat pay? Ive never been in military. Can I enter 0 in this section?

annel84
New Member

I'm at a section asking me "do you want to use last years earned income". What do I do here and why am I being asked this?

Where do I find non taxable combat pay? 

Ive never been in military, can I enter “0”?

DianeW777
Expert Alumni

I'm at a section asking me "do you want to use last years earned income". What do I do here and why am I being asked this?

Yes.  If you are not in the military you would have no 'nontaxable combat pay'.  Under the new legislation, if your earned income was higher in 2019 than in 2020, you can use the 2019 amount to figure your earned income tax credit (EITC) and child tax credit (CTC) for 2020. This temporary relief is provided through the Taxpayer Certainty and Disaster Tax Relief Act of 2020.

 

To find your 2019 earned income look at the EITC worksheet from your 2019 tax return. The earned income will be on that worksheet. If you don't have that worksheet, use all income from your 2019 tax return that was earned from a job or self employment on page 1, Form 1040-2019.

 

If your earned income in 2019 was lower than 2020, there no need for any research, use the earned income from 2020. There would be no advantage or additional credit if the earned income is lower in 2019.

 

Once you have the information you will know what to decide and TurboTax will help you.decide.

cadela9
Level 1

I'm at a section asking me "do you want to use last years earned income". What do I do here and why am I being asked this?

Does this mean that your 2020 AGI also has to be lower than 2019? My 2020 earned income is lower than 2019, but my AGI is higher, and Turbo Tax wont let me take the 2019 credit. But I can't find anything, anywhere saying that the AGI also has to be lower not just the earned income. And, the people I've talked to at Turbo Tax seem to have no idea.

JamesG1
Expert Alumni

I'm at a section asking me "do you want to use last years earned income". What do I do here and why am I being asked this?

The Earned Income Tax Credit has an adjusted gross income component as well as an earned income component.  I do not know what numbers you used on your tax return.

 

IRS Publication 596 Earned Income Credit page 18 states:

 

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 income.

 

Page 2 Table 1 Earned Income Credit in a Nutshell demonstrates that the credit is based upon:

  • Adjusted gross income (AGI) rules (see column on the left), as well as
  • Earned income rules (see column on the far right).
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April0914
New Member

I'm at a section asking me "do you want to use last years earned income". What do I do here and why am I being asked this?

Will the same W2's be used from 2019 tax return if you continued with the option to use last year's earned income?

Irene2805
Expert Alumni

I'm at a section asking me "do you want to use last years earned income". What do I do here and why am I being asked this?

Many people had lower incomes during the pandemic in 2020 or they may have received unemployment benefits.   These can affect the amount of any earned income credit and additional child tax credit you qualify for.  The IRS will allow you to choose to use your 2019 or your 2020 income, whichever gives you the higher credits.

 

xmasbaby0 gives an excellent explanation, as well as the steps to use in the calculation, in the answer to a similar question:  What’s the difference between using last year’s income or this year’s income for 2020 taxes

 

@April0914

someoneelse
New Member

I'm at a section asking me "do you want to use last years earned income". What do I do here and why am I being asked this?

I can't get to this section because I do not qualify for earned income for any year; however I still need to use the 2019 earned income for my filings because I contributed more money to my IRA than received in earned income for 2020.  How do I manually enter this?

AmyC
Expert Alumni

I'm at a section asking me "do you want to use last years earned income". What do I do here and why am I being asked this?

Using 2019 income is for Earned Income credit not IRA contributions. Your 2020 income determines your allowable 2020 contributions. See page 8 of Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs).

 

@someoneelse

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