EIC Question: Concern

[MAJ]

Okay - Established client walks in the door. HOH 1 child.
$108K W2 employee
Opens a Franchise Gym only to sell a 18 months later.

-97k Loss on Gym this year - 2016. Very well documented.
Depreciation was a huge help (40k from original startup equip; etc).

$4,993 Gambling winnings

AGI = 16k - Ain't that a kicker.
18k Schedule A - including gambling losses
$Zero Taxable.

So.. EIC kicks in and awards $3,373.00
Add $1,000 for Additional Child Tax Credit
on top of his $21,322 in Federal Withholding makes his Refund $25k. Nice. BUT
I question the EIC. I went through the questions and math just doesn't seem right.
On one hand he had earned income of $108k
But on the Business he had earned income of (-$97k)
Why wouldn't the W2 earned income rule out all other?
How to interpret ? Combined or any Individual?

Thoughts or reference to a defining moment of clarity!? lol I don't feel comfortable hitting send on this one - and he's fine if the $3373 comes off - he just doesn't want ANY issues. But - if he's 'entitled' then - ???

Thanks

Thanks??
PS - How's everyone holding up?

[TAXNJ]

Okay. Don't file until you are comfortable.

p.s. If one gets a solid state disc drive and wanted to mirror the drive do they need another solid state or non solid state disc drive?

[Gretel]

Why wouldn't the W2 earned income rule out all other?

Because earned income includes self-employed income. Look at your EIC worksheet, line 5, or better look at all the line to understand better how the final figure for earned income is arrived.

[Burke]

You said he sold the business which would have triggered depreciation recapture and maybe a 4797 gain? Be sure you have that down correctly before proceeding, which you have probably already done. And a negative income from Sche C would offset W-2 earnings for EIC.

[Super Mom]

a legitimate loss on business will subtract from w-2 income for EIC. Do check that depreciation and make sure that is correct since out of business. I even had one like this go through an audit--that was ok although they questioned the business loss, but as long as it is well documented, you are good!!