Eic

[ardi600]

parents are claiming the 18 year son. he made 8100 last year and he is in his last year of high school. the son lived with parents all year and received more than half of his support from them. parents income is 22,000. I believe he is a qualifying child for eic since the 3700 income limit applies to qualifying relative and not the qualifying child. correct?

[taxea]

the code says:
must receive less than $3,700 of gross income unless the dependent is your child and either under age 19 or a full-time student under age 24
does not provide more than 1/2 of his/her own support

[ddoshan]

parents are claiming the 18 year son. he made 8100 last year and he is in his last year of high school. the son lived with parents all year and received more than half of his support from them. parents income is 22,000. I believe he is a qualifying child for eic since the 3700 income limit applies to qualifying relative and not the qualifying child. correct?

He would be a qualifying child of the parents for the EITC regardless of his income. Even if he made 30K.

[RitaB]

Happy Place

He would be a qualifying child of the parents for the EITC regardless of his income. Even if he made 30K.

And, I just had the most pleasant little daydream, imaging each of my three kids having $30,000 in income.

OK, back to work.

[David1980]

He would be a qualifying child of the parents for the EITC regardless of his income. Even if he made 30K.

Well, true in that the amount of the income doesn't matter. What does matter is whether the child is providing over half their own support.

For example, here we have parents with $22,000 of income and a child with $8,000 of income. If the child spent 100% of their income on support they would have contributed $8,000 towards their support. If the parents split their $22,000 exactly three ways they would have contributed $7,333 towards the child's support. Which could result in the child not being a qualifying child because the child provided over half their own support.

That of course is not how you calculate support - there are worksheets you can use in Publication 501 - but those numbers would make me question the support test and ask questions and possibly do the worksheet when I otherwise would ignore it.

Maybe the child put $5,000 of his $8,000 of income into a savings account and only spent $3,000 on support, making it much easier for parents to say the child didn't provide over half. Maybe the parents have resources other than the income, some savings of their own for example that they tapped into to support the family. Maybe someone else helps with support like a grandparent. If in doubt, I go to Worksheet 1 in Pub 501.

I wouldn't in general take at face value the parents saying they provide over half the support to mean the parents actually provided over half the support. Taxpayers aren't tax specialists and don't know what all constitutes support.

[veritas]

There are four tests for EITC

and a qualifying child:

Qualifying Child
For purposes of the earned income credit, a child must meet all of
the following four tests.
1) Relationship. The child must be the taxpayer’s son, daughter,
stepchild, foster child, or a descendant of any of them (for example,
a grandchild), or brother, sister, half brother, half sister,
stepbrother, stepsister, or a descendant of any of them (for example,
niece or nephew).
2) Age. The child must be under age 19 at the end of 2011, and
younger than the taxpayer (or spouse if filing jointly); under
age 24 at the end of 2011, a student, and younger than the taxpayer
(or spouse if filing jointly); or permanently and totally
disabled at any time during 2011, regardless of age.
3) Residency. The child must have lived with the taxpayer in the
U.S. for more than half of 2011.
4) Joint return. The child cannot file a joint return for
the year. Exception: The joint return test does not
apply if the child and his or her spouse file a joint
return only to claim a refund


from TTB page 11-8

[Gary2]

Well, true in that the amount of the income doesn't matter. What does matter is whether the child is providing over half their own support.

There is no support test for EIC. The Uniform Definition of a Child isn't as uniform as we would like.

[David1980]

Quite right, missed that it was regarding EIC... where the support test doesn't matter.

[taxea]

Well, true in that the amount of the income doesn't matter. What does matter is whether the child is providing over half their own support.

For example, here we have parents with $22,000 of income and a child with $8,000 of income. If the child spent 100% of their income on support they would have contributed $8,000 towards their support. If the parents split their $22,000 exactly three ways they would have contributed $7,333 towards the child's support. Which could result in the child not being a qualifying child because the child provided over half their own support.

That of course is not how you calculate support - there are worksheets you can use in Publication 501 - but those numbers would make me question the support test and ask questions and possibly do the worksheet when I otherwise would ignore it.

Maybe the child put $5,000 of his $8,000 of income into a savings account and only spent $3,000 on support, making it much easier for parents to say the child didn't provide over half. Maybe the parents have resources other than the income, some savings of their own for example that they tapped into to support the family. Maybe someone else helps with support like a grandparent. If in doubt, I go to Worksheet 1 in Pub 501.

I wouldn't in general take at face value the parents saying they provide over half the support to mean the parents actually provided over half the support. Taxpayers aren't tax specialists and don't know what all constitutes support.

This is why it is good to recommend that the kid put his earnings into a savings account and just use what he needs or wants for monthly entertainment, eatting out etc.

[Gary2]

This is why it is good to recommend that the kid put his earnings into a savings account and just use what he needs or wants for monthly entertainment, eatting out etc.

Better yet, an IRA. As a student, he won't get the Saver's Credit, and the tax savings won't be huge, but it's a good habit to get into.