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Padierna15
New Member

What does it mean when it says that I can use my 2019 taxes?

 
5 Replies
RayW7
Expert Alumni

What does it mean when it says that I can use my 2019 taxes?

You may be inquiring about the Earned Income Tax Credit-

 

The Consolidated Appropriations Act (CAA) was signed into law on December 27, 2020 as a stimulus measure to provide relief to those affected by the pandemic. For tax year 2020, The CAA allows taxpayers to use either their 2020 or 2019 earned income in calculating the Additional Child Tax Credit (ACTC) as well as the Earned Income Tax Credit (EITC).

 

One of the most beneficial and refundable tax credits for families with low or moderate incomes is the Earned Income Tax Credit (EITC).

 

Here are five facts about the EITC all taxpayers should know.

1. Eligibility is limited to low-to-moderate income earners

The general eligibility rules for the EITC are fairly straightforward:

  • Taxpayers must file as individuals or married filing jointly.
  • If married, you, your spouse and your qualifying children must have valid Social Security numbers.
  • You must also be 25 or older but younger than 65.

Although the EITC typically is considered a credit for low-income filers, there are many variations of income, filing status and number of qualifying dependents that affect eligibility. For example:

  • In 2020, a married couple with three children and adjusted gross income of $56,844 or less could receive up to $6,660.
  • An individual who earns $15,820 and has no children may receive up to $538.

It's recommended that all filers explore their eligibility for receiving the EITC each year.  For the 2020 tax year, the maximum credit is $6,660.  According to the Internal Revenue Service, the average amount credited in 2018 was $2,488.

2. Self-employed still counts

Many filers, especially self-employed individuals, fail to take advantage of credits because they think they are ineligible.

The IRS considers all income that is earned eligible for the credit. That includes:

  • Wages
  • Salaries
  • Tips
  • Union strike benefits
  • Long-term disability benefits received prior to minimum retirement age
  • Net earnings from self-employment
  • Gross income received as a statutory employee (an independent contractor under common law rules)

Types of income that do not qualify as earned income for the credit include:

  • Child support
  • Retirement income
  • Social Security benefits
  • Unemployment benefits
  • Alimony
  • Pay received for work while in prison

3. Investment income can disqualify you

In 2020, income derived from investments disqualifies you if it is greater than $3,650 in one year, including income from stock dividends, rental properties or inheritance.

4. Eligibility fluctuates

Taxpayers should pay attention to their EITC eligibility every filing year as tax laws and personal tax situations can change. Changes that could affect your eligibility for the EITC can include

  • a new job,
  • unemployment,
  • loss of an annual bonus,
  • a change in marital status, or
  • a change in a spouse's employment situation.

5. Tax software can help

Electronic tax programs offer an advantage over traditional pen and paper tax preparation because, as long as you enter your information accurately, they ensure that you receive the tax benefits you deserve.

Because the EITC is one of the most lucrative credits available to struggling Americans, filers should consider using a qualified tax software system like TurboTax to maximize the earned income credit.

dustin2550
New Member

What does it mean when it says that I can use my 2019 taxes?

 Can I use my 2019 investment income to qualify for the 2020 EIC? I know it says I can use my 2019 income if its advantageous, but does this mean the investment income as well? I made 5000+ in investment income in 2020 and 0 in 2019. So, as it stands right now with my 2020 investment income has knocked me out of EIC for 2020. 

JohnB5677
Employee Tax Expert

What does it mean when it says that I can use my 2019 taxes?

Yes you can use your 2019 income for the EITC this year.

 

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.

I want to use my 2019 tax return to file for 2020 ... (intuit.com)


No, investment income does not count.  If you run your own business, your net income also counts as earned income for EITC purposes. However, things like investment income, pensions, Social Security, or unemployment benefits do not.

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Sandiegokings
Level 1

What does it mean when it says that I can use my 2019 taxes?

I earned $24,596 in 2019 and less than $4000 in 2020 and am on unemployment im also married filing jointly for both years and have a child dependent under 3 years old. 

BUT I'm 24 years old not 25 and my wife who had no income in 2019 and only worked for 15 days in december 2020 is 26 years old. Do we still qualify for CAA? Or are we just screwed cause I'm one year below??

JohnB5677
Employee Tax Expert

What does it mean when it says that I can use my 2019 taxes?

Yes, you do qualify for CAA.

Your ages are of no consequence.

You can use 2019 to calculate the stimulus.

The cutoff for the stimulus starts at $150,000.

So on all counts it does sound like you qualify.

 

The third stimulus check will open up more avenues for people to claim a payment, as long as their yearly earnings in 2019 or 2020 fall within the brackets for receiving a third check.

 

This would change the income limit for individuals and families who'd qualify for a full stimulus payment -- it isn't the same as it was for the first two rounds of checks approved in 2020.

 

The major variables the IRS plugs into the stimulus formula are:

  • Your AGI per your 2019 or 2020 federal tax returns.
  • Upper income limits for single taxpayers, heads of household (for example, a single person with at least one child) and married couples filing jointly.
  • The number of eligible dependents you claim.
  • Reduction or "phase-out" rate -- the amount your total would drop for every $1,000 you make above the income limit that allows you to qualify for the full check amount. In other words, the IRS calculates a partial payment if you don't qualify for the full amount.

 

 

 

@Sandiegokings

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