EIC

[GeorgeM]

I have a client that claimed an EIC on their return, and received a letter from the IRS disallowing the credit.

The client has 2 schedule C's, retirement income, social security and interest income, the schedule C's show a net loss of $75.

ATX calculated the EIC based on the gross income of the schedule C's, and came up with an EIC.

The IRS states that they have no earned income and disallowed the EIC.

They have a disabled child which allows the EIC.

Is the IRS correct?

Thank you for any responses.

[mcb39]

You mention retirement income. Are either of them over 65? That would disqualify them for the credit.

[Gail in Virginia]

You could make an election on the SE to report $1600 of self employment income even though they had a loss of $75 on the schedule C, subject to certain conditions, and that would have given them "earned" income for purposes of EIC. However, I don't believe that you can use gross income from a schedule C and ignore expenses to get an earned income figure for EIC purposes. That is one reason that due diligence includes checking for expenses on self-employment.

[GeneInAlabama]

If there is no earned income, he can't get earned income credit. ATX should not have calculated the credit.

[Lion EA]

Being over 65 disqualifies EIC only if no qualifying children. But your client's problem is earned income. Gail's method works. But, only for a small number of years, so tell them to increase their profits!

[MAMalody]

I would be worried that ATX cannot compute the EIC.

[Jack from Ohio]

I would be worried that ATX cannot compute the EIC.

ATX does EIC correctly if all inputs are done correctly. There have been many times ATX did not allow EIC that the reason was not obvious. Upon further research, we found that ATX was correct.

[Pacun]

IRS is correct.

If you don't have EI, no EIC.

[RitaB]

George, do you maybe have a box checked incorrectly or an incorrect amount on one of the EIC tabs (say for Earned Income or Part II of Worksheet B ) ?

[bertrans]

I have a client that claimed an EIC on their return, and received a letter from the IRS disallowing the credit.

 

The client has 2 schedule C's, retirement income, social security and interest income, the schedule C's show a net loss of $75.

 

ATX calculated the EIC based on the gross income of the schedule C's, and came up with an EIC.

 

The IRS states that they have no earned income and disallowed the EIC.

 

They have a disabled child which allows the EIC.

 

Is the IRS correct?

 

Thank you for any responses.

 

If a person is a statutory employee, his compensation is reported on a W-2 (with the statutory employee indicator checked.) He must use Schedule C, and report the bottom line on 1040, line 7; HOWEVER, he must use his Schedule C gross receipts to compute EIC (provided the ceiling is not exceeded, etc.) Is that what happened?