Foreign income - Earned income credit.

[Jack from Ohio]

Client works as a teacher in Costa Rica. 

She pays Costa Rican income tax and Costa Rican Social Security as well. 

She spent less than 330 days in Costa Rica in 2014. 

Completing her return, Form 1116 gives her credit for taxes paid in Costa Rica, so no U.S. Federal tax due.

 

Here is the question:  Does her foreign income allow her to have Earned Income Credit?

 

Her U.S. home is in Wyoming.

 

Anyone with experience here would be greatly appreciated.

[BulldogTom]

I believe if you go through the worksheet for earned income tax credit in the software, it will walk you through the calculation, and it will exclude from earned income any amount that was excluded on the 2555.  I don't have the software in front of me right now, but I am pretty sure that is how it works.

 

Tom

Newark, CA

[Pacun]

You have to live in the US for 6 months for EIC.

[Terry D EA]

You have to live in the US for 6 months for EIC.

 

I'm not so sure I agree. Jack didn't say anything in the original post about the TP citizenship.

 

You must be a U.S. citizen or resident alien all year, or a nonresident alien married to a U.S. citizen or resident alien and filing a joint return

[Pacun]

Terry,

 

I always thought that you must LIVE in the same household in the US with your dependent for at least 183 nights of the year to claim EIC so if she was in Costa Rica for a week and made 10K, that could work, but if she was in Costa Rica for 7 months, she doesn't qualify. If no child is involved, the post below is clear and says that she must be here for more than 6 moths.

 

Assuming that her husband stay with the child and they file jointly, she will qualify but I doubt that between the two spouses don't make more than the EIC limit. I wish the poster would state if children are involved, if MFJ is involved and to say how many days she was in Costa Rica. Last year I was less than 330 days in Costa Rica (I was there for two days).

 

This is from the IRS.

Who can claim the credit and if I qualify, how do I get it?

To claim EITC on your tax return, you must meet all the following rules:

• You, your spouse (if you file a joint return), and all others listed on Schedule EIC, must have a Social Security number that is valid for employment
• You must have earned income from working for someone else or running or operating a farm or business
• Your filing status cannot be married filing separately
• You must be a U.S. citizen or resident alien all year, or a nonresident alien married to a U.S. citizen or resident alien and filing a joint return
• You cannot be a qualifying child of another person
• You cannot file Form 2555 or Form 2555 EZ (related to foreign earned income)
• You must meet the earned income, AGI and investment income limits (income limits change each year), see EITC Income Limits for the tax year amounts
• And you must meet one of the following:
  • Have a qualifying child (see who is a qualifying child below)
  • If you do not have a qualifying child, you must:
    • be age 25 but under 65 at the end of the year,
    • live in the United States for more than half the year, and
    • not qualify as a dependent of another person

[Jack from Ohio]

More clarification,

 

She is an American citizen, unmarried. She has a child with a Costa Rica citizen.  She made several trips home so grandma could see the baby, so she probably only spent 300 days in Costa Rica.  She does not qualify for Foreign Income Exclusion on Form 2555.

[Pacun]

Who is a qualifying child?

Your child is a qualifying child if your child meets all of the following tests:

1. Age
2. Relationship
3. Residency
4. Joint Return

Age

Your child must meet one of the following:

• Be under age 19 at the end of the year and younger than you or your spouse, if you file a joint return
• Be a full-time student under age 24 at the end of the year and younger than you or your spouse, if you file a joint return, or
• Be permanently and totally disabled at any time during the year and any age.

Relationship

To be your qualifying child, a child must be your:

• Son, daughter, stepchild, eligible foster child, or a descendant of any of them (for example, your grandchild), or
• Brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant of any of them (for example, your niece or nephew).

Definitions to clarify the relationship test

Adopted child

. An adopted child is always treated as your own child. This includes a child who was lawfully placed with you for legal adoption.

Eligible Foster Child

. A person is your eligible foster child if the child is placed with you by an authorized placement agency or by judgment, decree, or other order of any court of competent jurisdiction.

Residency Test

Your child must have lived with you, or your spouse if you file a joint return, in the United States for more than half of the year.

Joint Return Test

Your child must not have filed a joint return or if your child filed a joint return, your child and his/or her spouse filed only to claim a refund and were not required to file.

See Publications 596, 596(SP) and 501 for more details

 

 

 

Based on the above information from the IRS, I was right, the child must be in the U.S. for more than 6 months and Live with you or your spouse. If the child was in Costa Rica or the mother in this case, no EIC.