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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:
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.
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