Earned income credit

[mrbill]

Client received dividends of $3,826 which is $476 above the qualifying amount ($3,350) . If the client had < than $3,350 she would have received the EIC of $2,610. In short $476 in income costs her $$2,610 in her refund. Any thoughts around this ? Thanks,

[BHoffman]

Married couple in their early 60's worked a little bit, got a little early social security income, are sitting on a comfortable amount of cash in the savings account, tidy sum in IRA accounts, living in their mortgage free house, and they qualify for some EIC.

It's just the way it is.

[kathyc2]

Nothing you can do about it for 2014. It is what it is.

You can do some tax planning to prevent it from happening next year, but like all things EIC related, proceed with caution.

[NCA]

Just wait for the IRS to give it

Frustrated with EIC right now too.

In 2013 client had $36k of wages, $42k sch F loss, and $38k 4797 gain related to sch F (sold breed cattle held less than 24 mos.- Part II & depreciated equip - Part III). The calculations and my software came up with zero EIC because earned income was less than zero ($36k-$42k, 4797 income doesn't flow to EIC worksheets). Client receives check from IRS for missed EIC that is calculated based on the wage amount of $36k, 3 dep. = ~$3100.

I cannot for the life of me determine why it works that way. I manually recalculated everything through the worksheets and don't see where they qualify for EIC. Farming is still considered being self-employed isn't it? I'd love any insight into what I'm missing or if the IRS is just throwing cash at people these days. Wondering if the IRS will turn around and request those funds back at some point.

[TaxGuyBill]

EDIT: I now think this is incorrect, please see comments below.

The calculations and my software came up with zero EIC because earned income was less than zero ($36k-$42k, 4797 income doesn't flow to EIC worksheets).

It is wages plus "net earnings" from self employment. The "net earnings" are taken from Schedule SE (EIC Worksheet B). In other words, the LOSS does not offset the wages to come up with "Earned Income".

Also, the 4797 income DOES go to the EIC worksheets. It is not "earned income", but affects AGI. EIC Worksheet A uses AGI. The EIC is calculated once using Earned Income, and once again using AGI. The lowest of the two credits is the actual EIC.

http://www.irs.gov/pub/irs-pdf/i1040gi.pdf#page=59

[David1980]

It is wages plus "net earnings" from self employment. The "net earnings" are taken from Schedule SE (EIC Worksheet B). In other words, the LOSS does not offset the wages to come up with "Earned Income".

Also, the 4797 income DOES go to the EIC worksheets. It is not "earned income", but affects AGI. EIC Worksheet A uses AGI. The EIC is calculated once using Earned Income, and once again using AGI. The lowest of the two credits is the actual EIC.

http://www.irs.gov/pub/irs-pdf/i1040gi.pdf#page=59

Would it not fall under Part 2 "Self-Employed NOT Required to File Schedule SE"? Which then has "Enter any net farm profit or (loss) from Schedule F, line 34..."

[ddoshan]

In connection with the Farm scenario, I believe the IRS got it wrong. But admit I am just going by gut instinct right now. Have seen cases in the past where the IRS has erroneously given EIC when it was not proper.

[TaxGuyBill]

Would it not fall under Part 2 "Self-Employed NOT Required to File Schedule SE"? Which then has "Enter any net farm profit or (loss) from Schedule F, line 34..."

I think you are right. I was wrong, sorry.

Just ignore my previous comment. :-)