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How to Claim the Earned Income Credit

Qualifications

1.

Determine that you received earned income in 2000. Earned income is all the taxable and nontaxable income you get from work.

2.

Include wages, salaries, tips, self-employment income, deferred compensation contributions to retirement plans, salary reductions in a cafeteria benefit plan, dependent care benefits, adoption benefits, educational assistance benefits, union strike benefits, statutory employee income, disability payments from an employer disability plan if you are under retirement age, meals and lodging that are for the convenience of your employer or due to military service and the clergy housing allowance if included on Schedule SE.

3.

Don't include interest, dividends, pensions, annuities, Social Security, railroad retirement benefits, alimony, child support, jury duty pay, worker's compensation, veteran's benefits, welfare benefits, workfare payments, penal inmate earnings, unemployment compensation or disability payments after you reach retirement age or if you paid premiums for the disability insurance.

4.

Determine whether you have one or more qualifying children. A qualifying child must be your son, daughter, grandchild, stepchild, adopted child or eligible foster child; must be under the age of 19 at the end of 2000, under the age of 24 if a full-time student, or any age if permanently and totally disabled; and must have lived with you for more than half of 2000 - (all of 2000 if an eligible foster child). A qualifying child must have a Social Security number.

5.

Determine that your earned income in 2000 was less than $10,380 if you had no qualifying child, less than $27,413 if you had one qualifying child or less than $31,152 if you had more than one qualifying child.

6.

Determine that your modified adjusted gross income in 2000 was less than $10,380 if you had no qualifying child, less than $27,413 if you had one qualifying child or less than $31,152 if you had more than one qualifying child. Your modified adjusted gross income is your regular adjusted gross income on your 1040 plus any tax-exempt interest, nontaxable pension or IRA distribution (except a rollover), and 75 percent of your business losses.

7.

Verify that you have a valid Social Security number.

8.

Verify that you were a U.S. citizen or resident alien for all of 2000.

9.

Verify that you are not filing taxes as married filing separately.

10.

Determine that you did not have investment income of more than $2,400 in 2000. Investment income is generally interest, dividends and capital gains.

11.

Determine that your qualifying child is not the qualifying child of anyone else who has a higher modified adjusted gross income than you have. For example, if you and your son lived with your mother for more than half the year and your mother has a higher modified adjusted gross income than you have, you cannot claim your son as your qualifying child.

12.

Determine that you are not the earned-income-credit-qualifying child of anyone.

13.

Determine that, if you do not have qualifying children, you are not, yourself, the dependent of anyone else; you are over 24 and under 65 years of age; and you lived in the United States for at least half of the year.

Claiming the Credit

1.

Obtain Schedule EIC. This is available online or at any Internal Revenue Service office.

2.

Determine whether you want the IRS to figure out your earned income credit for you. Print "EIC" to the right of line 59a of the 1040, line 37a of the 1040A or line 8b of the 1040EZ if you do want the IRS to figure it out. You must still complete the rest of your tax return, and you must fill out Schedule EIC if you have a qualifying child.

3.

Fill out Schedule EIC if you have a qualifying child or qualifying children.

4.

Calculate your earned income.

5.

Calculate your modified adjusted gross income.

6.

Determine that your modified adjusted gross income is not more than your earned income. If your modified adjusted gross income is not more than your earned income, look up the amount of your earned income in the EIC tables and find the amount of your earned income credit. Or,

7.

Determine that your modified adjusted gross income is more than your earned income. If your modified adjusted gross income is more than your earned income, look up both the amount of your earned income and the amount of your modified adjusted gross income in the EIC tables. Whichever amount of earned income credit is smaller, that is your earned income credit.

8.

Write the dollar amount of your credit on the line for earned income credit on the 1040, 1040A or 1040EZ.

Tips and Warnings

  • The EIC is one of very few refundable credits, meaning you can get back more money from the IRS than you paid in tax withholdings. It is designed to help working people who are struggling, especially if they have children. Even if you have no tax liability, you can be eligible for the earned income credit.


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