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:
- Login to your TurboTax Account
- Click on the Search box on the top and type "EIC"
- Click on “Jump to EIC”
- Answer the questions until you reach the screen "Do you want to use last year’s earned income?"
- Note your current refund amount using your 2020 earned income at the top of the screen.
- Click "Yes", enter your "2019 Earned Income" if the field is blank and click "continue".
- Compare the new refund amount using your 2019 earned income with the previously noted refund amount using your 2020 earned income.
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 for the Earned Income Tax credit in TurboTax Online, go to the Earned Income tax credit section.
- In the Search box on the top right of your screen, enter earned income tax credit and click on Find at the right
- In the search result box, click on Jump to earned income tax credit
- 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.
- Click on the radio button Yes and enter your 2019 earned income and click Continue
- TurboTax will give you your new Earned Income tax credit using your 2019 earned income
- If the new credit is higher, click Continue to accept it
- 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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