PYEI prior year earned income

[katri]

Does ATX automatically fill in the PYEI on the CTC and EIC and 8812 forms ? 

If not from what line on the 2019 1040 do I get the number?

thanks

[Pacun]

No and yes.

It does it automatically for EIC but you have to check the box. You have to enter it for CTC.  See my other post that someone just made a comment.

Addition: I just saw your comment on the post I suggested.

 

Edited February 6, 2021 by Pacun

[Randall]

As I understand, the option for using 2019 earned income is only if 2019 is higher than 2020.  My client has higher 2020 earned income and went above the eligibility level.  Therefore he can't opt to take the 2019 amount.  And ATX doesn't have anything in his case.  I'm assuming from your comments that if 2019 was higher than 2020, ATX would have these options available?

[Randall]

 

On 2/5/2021 at 10:19 PM, Pacun said:

No and yes.

It does it automatically for EIC but you have to check the box. You have to enter it for CTC.  See my other post that someone just made a comment.

Addition: I just saw your comment on the post I suggested.

 

Are you saying ATX will automatically calculate EIC based on 2019 earned income?  I have a client.  Did not qualify for EIC in 2019, was only 24 years old.  In 2020, she is 25.  Her earned income(W2) went down.  But she drew unemployment and her AGI is over the limit.  So would she be able to use her 2019 earned income or would she still not be qualified in 2020?  I didn't see anything automatically from ATX.

 

[Pacun]

Yes, it is not checking the age... ONLY earned income.

[katri]

Earned income is NOT only w2 wages

Look at EITC for Types of Earned Income

You don't have to use 2019 earned income - Don't check the box and ATX will use 2020 income

 

[Randall]

17 hours ago, katri said:

Earned income is NOT only w2 wages

Look at EITC for Types of Earned Income

You don't have to use 2019 earned income - Don't check the box and ATX will use 2020 income

 

Where's the box to check?

 

[Randall]

49 minutes ago, Randall said:

Where's the box to check?

 

I found the box.  I was looking all over for it.

[Pacun]

From my other post

"Since you have to use 2019 on both EIC and child credits if higher, be careful because you have to manually select both. 

on Sch EIC Step 5, 2 you have to check the box. Then go to Sch 8812, 6a and manually enter the 2019 amount"

[katri]

I think I'm following the directions correctly but

2020 EI is 31063  and EIC is 842 and CDC is 214

2019 EI is 35535 and EIC is 842 and CDC is 214

 

The amount are the same for both years - what's my error ?

Thanks

[Lion EA]

If you're computing EIC and ACTC on prior year EI, then you would expect both to match unless other things changed, such as # of children, wouldn't you? (I have only a couple clients with EIC, and they haven't sent their tax info yet.)

[Pacun]

As a rule of thumb, if your client had EI of more than $25K for 2020, don't bother to check 2019.

[katri]

Are different filing status in 2020 MFJ and 2019 HOH causing my problem with PTEI

2019 HOH EI 35535 EIC was 890 and 8812 was 731

2020 MFJ EI 31063 EIC is 842 and 8812 is 214

but when I check use PYEI on EIC and 8812 the 2019 EIC of 35535 the EIC is 842 and 8812 is 214 same as 2020

[Lion EA]

Did you enter both spouses' 2019 in your 2020 return?

[katri]

so she was hoh in 2019 so I need to add her now husband income in 2019 - they married 2/22/2020

in 2020 mfj her husband is  a stay at home dad with NO income

 

[Pacun]

Katri...

Why are you trying to use 2019 income if your client will benefit the MOST if you use 2020 income?

 

[katri]

I'LL TRY EXPLAIN AGAIN

2019 Wages etc 35535

line 7b total income 35535

line 8b AGI 35535

 

for 2020

line 1 wages etc 31063

line 8 other income unemployment 11282 - unemployment not earned income

line 9 total income 42355

line 11 AGI 42355

 

So to figure EIC using 2019 numbers EIC STEP 5 LINE 2 -IT'S CORRECT 35535 on WORKSHEET A Part 1 line 1 is ok 35535 BUT line 3 ATX is using 2020 AGI of 42355 instead of  2019 AGI of 35535 so using 2019 numbers and 2020 numbers you get the same EIC because line 3 isincorrect

 

Should  I talk to ATX support ?

 

Thanks

[Pacun]

No, you should not call support. You should not try to use 2019 income if the person doesn't qualify or will not benefit.

[Pacun]

I am going to give you an example of when to use Earned income from 2019.

HH with two children under 17. 

2019 earned income 25K. other none earned income $40K.  So in 2019 this person didn't get EIC.

2020 earned income is 1K, unemployment is 8K. So, this person could not get full additional child tax credit of $2,800 and her EIC is tiny if using 2020 earned income. So this person qualifies or will benefit to use 2019 earned income credit. 

Same situation as before except that in 2020, person earned income was 1K and unemployment benefits were $50K. So this person is well beyond EIC credit for 2020 and is getting the full $4,000 of child tax credit. Why will you look for 2019 earned income if there will be no additional benefit. 

Another example, same situation for 2019 but in 2020 the person had earned income of $20K. As you know 20K is a very sweet spot for EIC and child tax credit for a person with two children. Why will I bother to compare 2019 earned income if I am in the best sweet spot?

[Chowdahead]

So here is a weird one.  I have some clients from 2019 who are Rideshare drivers.  In 2020 their Rideshare income is way down or zero, they may taken a part-time job with little wages, and they also collected some unemployment benefits.  They have kids but their 2020 EIC is near zilch.

First of all, clicking the box on the EIC Questions tab to use 2019 Earned Income doesn't pull from the 2019 Work Sheet B for the Sch EIC.  It pulls Line 1 of the 2019 1040 which is Wages.  However, these folks have income on Line 7A from the 2019 1040, which is business income.

When I open up the client's 2019 Sch EIC and go to Worksheet B, on Line 6 of Part IV, it says exactly what the Earned Income was for 2019.  This is what doesn't carry over to ATX 2020.

The strange part is that if I manually plug this number into the 2019 income on the Sch EIC, It generates a bigger refund than 2019 because although the same income amount is being used to calculate the 2020 Earned Income Credit, there are no self-employment taxes to be paid because the income was earned in 2020.

This all sounds logical and perhaps it's a inadvertent benefit to self-employed filers but I just wanted second opinions if this sounds correct.

[Pacun]

That's correct, the refund will be bigger because they are not paying SE taxes and maybe unemployment withheld some money.  Yes, I noticed that Schedule C income is not pulled.  At some point I thought I forgot to check "materially participation" for 2019 but I checked and I did it correctly.  In this case you have to manually enter the correct amount on EIC sch and on form 8862 because you have to use it in both. 

[Ismail]

Hello,

What about if the taxpayer income were 100% from unemployment and no earned income, will they still qualify for PYEI & Child credit?

Thank you

[Pacun]

1 hour ago, Ismail said:

Hello,

What about if the taxpayer income were 100% from unemployment and no earned income, will they still qualify for PYEI & Child credit?

Thank you

Yes, and if they had earned income in 2019, they could also qualify for EIC.

[Ismail]

Thank you Pacun!

[Ismail]

I have a client who is with his entire 401k (~34k) due to COVID. This is my first time doing this, how can I have my client get advantage of the 10% penalty waiver exception and spread evenly over tax years 2020, 2021 and 2022. What forms do I need?