EIC WITH DISABILITY INCOME

[YUKEM68]

PLEASE LET ME KNOW DID YOU EVER HEAR SOMETHING ABOUT GETTING EARNED INCOME CREDIT WITH CERTAIN DISABILITY INCOME?

WHAT DISABILTIY INCOME THAT WOULD BE?

I TRIED TO READ A PUBLICATION AND FOUND NOTHING.

THANKS

JULIE

[Pacun]

Let's say you make $200K yearly and then you have an accident on December 31. Your company has short term dissability benefits and they pay you 2 weeks from Sick days. I think you would qualify for EIC.

[Cathy]

PLEASE LET ME KNOW DID YOU EVER HEAR SOMETHING ABOUT GETTING EARNED INCOME CREDIT WITH CERTAIN DISABILITY INCOME?

WHAT DISABILTIY INCOME THAT WOULD BE?

I TRIED TO READ A PUBLICATION AND FOUND NOTHING.

THANKS

JULIE

Julie,

If one would draw a pension due to a disability, that pension income is treated as earned income until the minimum retirement age of that individual. Such income does count toward earned income for the EIC.

Cathy

[taxtrio]

If a person is receiving a disability pension, with Code 3, and they are under retirement age.

You input the 1099R exactly as I have described. The disability pension will show up as wages

on line 7 of 1040 (as it is supposed to), and that would be qualifying "wages" for the EIC.

I have several clients that qualify ... they still have qualifying children at home.. Makes a BIG

differnce in there refund. ATX does it quite nicely... it just doesn't understand that I can still

subtract it as a pension on Michigan. (override).

Hope this helps.

[Cathy]

From EIC IRS pub...

Disability Benefits

If you retired on disability, benefits you receive under your employer's disability retirement plan are considered earned income until you reach minimum retirement age. Minimum retirement age generally is the earliest age at which you could have received a pension or annuity if you were not disabled. You must report your taxable disability payments on line 7 of either Form 1040 or Form 1040A until you reach minimum retirement age.

Beginning on the day after you reach minimum retirement age, payments you receive are taxable as a pension and are not considered earned income. Report taxable pension payments on Form 1040, lines 16a and 16b, or Form 1040A, lines 12a and 12b.

[Joel]

Years ago I had a couple with the husband on disability retirement and his wife legally blind. They had an adult disabled son living with them and being supported by them. Until he reached age 65 (normal retirement for his company) I was so happy to prepare their tax return and give them the EIC credit. They were so appreciative of the EIC benefits they received.

[YUKEM68]

If a person is receiving a disability pension, with Code 3, and they are under retirement age.

You input the 1099R exactly as I have described. The disability pension will show up as wages

on line 7 of 1040 (as it is supposed to), and that would be qualifying "wages" for the EIC.

I have several clients that qualify ... they still have qualifying children at home.. Makes a BIG

differnce in there refund. ATX does it quite nicely... it just doesn't understand that I can still

subtract it as a pension on Michigan. (override).

Hope this helps.

Thank You for your help!

[SCL]

Thank You for your help!

i have had clients make ira contributions (based on their pre-retirement age, code 3 pensions as line 7 earned income) that double bubbles the deduction when their soc sec disability income is taxable.