EITC says unemployment income not to be considered. but IRS requires unemployment income in taxes, which then disqualifies EITC income limit. what is the deal?

[xmasbaby0]

You MUST enter the unemployment.

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.

Please follow these steps in TurboTax:

1. Login to your TurboTax Account 
2. Click on the Search box on the top and type "EIC"
3. Click on “Jump to EIC”
4. Answer the questions until you reach the screen "Do you want to use last year’s earned income?"
5. Note your current refund amount using your 2020 earned income at the top of the screen.
6. Click "Yes", enter your "2019 Earned Income" if the field is blank and click "continue".
7. Compare the new refund amount using your 2019 earned income with the previously noted refund amount using your 2020 earned income.

[MarilynG1]

Yes, Unemployment Income is taxable income; however, since it is considered Unearned Income, it is not considered for the Earned Income Credit. 

Click this link for more info on Unemployment and the Earned Income Credit. 

[drdoruk]

im just trying to figure out how to apply for EIC because the software just says my AIG is above the limit by 1000 and thats due to unemployment income. i guess software algorithm is failing to deduct unemployment income for EIC calculations. do you have any recommendations that would work for me?

[drdoruk]

Thank you very much. I followed your instructions. I get this message "It turns out you don't qualify for this credit" and i m not give an option to use last years income, but just hit "Done" move on.