Earned income credit is a refundable credit that may be available to your client if he/she is a lower-income worker and meet other certain criteria. Income requirements to qualify for the credit is as follows:
Earned income does not include the following:
However, if your client has over $2,350 in disqualified income (interest, dividends, rent and royalty income, and net gain capital income), the credit can no longer be claimed.
If your client has a child, the child must be their natural child, adopted child, stepchild or foster child. The child must be under the age of 18 or under the age of 24 if a fulltime student. The child may be any age if permanently and completely disabled. The child must also have lived with your client in their primary residence within the US for at least six months. A foster child only qualifies if he has lived with your client for the entire year.
If your client does not have children, he/she must have had a primary residence within the US for more than 6 months, must file a joint return if married in addition to the afore mentioned income qualifications and cannot be a qualifying child of another taxpayer.
To claim the earned income credit, filers of the 1040A and 1040 must fill out Schedule EIC and attach it to their tax return. Filers of a 1040EZ only need to enter the amount of their credit on line 8a. The credit is computed according to the IRS EIC Table located in your tax instruction booklet.
If an earned income credit is claimed fraudulently, the taxpayer will be prohibited from claiming future earned income credits for the following ten years. If a credit was claimed recklessly or in disregard to the rules.