GeorgeM Posted June 17, 2014 Report Share Posted June 17, 2014 I have a client that claimed an EIC on their return, and received a letter from the IRS disallowing the credit. The client has 2 schedule C's, retirement income, social security and interest income, the schedule C's show a net loss of $75. ATX calculated the EIC based on the gross income of the schedule C's, and came up with an EIC. The IRS states that they have no earned income and disallowed the EIC. They have a disabled child which allows the EIC. Is the IRS correct? Thank you for any responses. Quote Link to comment Share on other sites More sharing options...
mcb39 Posted June 17, 2014 Report Share Posted June 17, 2014 You mention retirement income. Are either of them over 65? That would disqualify them for the credit. Quote Link to comment Share on other sites More sharing options...
Gail in Virginia Posted June 17, 2014 Report Share Posted June 17, 2014 You could make an election on the SE to report $1600 of self employment income even though they had a loss of $75 on the schedule C, subject to certain conditions, and that would have given them "earned" income for purposes of EIC. However, I don't believe that you can use gross income from a schedule C and ignore expenses to get an earned income figure for EIC purposes. That is one reason that due diligence includes checking for expenses on self-employment. Quote Link to comment Share on other sites More sharing options...
GeneInAlabama Posted June 17, 2014 Report Share Posted June 17, 2014 If there is no earned income, he can't get earned income credit. ATX should not have calculated the credit. Quote Link to comment Share on other sites More sharing options...
Lion EA Posted June 17, 2014 Report Share Posted June 17, 2014 Being over 65 disqualifies EIC only if no qualifying children. But your client's problem is earned income. Gail's method works. But, only for a small number of years, so tell them to increase their profits! 1 Quote Link to comment Share on other sites More sharing options...
MAMalody Posted June 17, 2014 Report Share Posted June 17, 2014 I would be worried that ATX cannot compute the EIC. 1 Quote Link to comment Share on other sites More sharing options...
Jack from Ohio Posted June 17, 2014 Report Share Posted June 17, 2014 I would be worried that ATX cannot compute the EIC. ATX does EIC correctly if all inputs are done correctly. There have been many times ATX did not allow EIC that the reason was not obvious. Upon further research, we found that ATX was correct. 2 Quote Link to comment Share on other sites More sharing options...
Pacun Posted June 17, 2014 Report Share Posted June 17, 2014 IRS is correct. If you don't have EI, no EIC. Quote Link to comment Share on other sites More sharing options...
RitaB Posted June 17, 2014 Report Share Posted June 17, 2014 George, do you maybe have a box checked incorrectly or an incorrect amount on one of the EIC tabs (say for Earned Income or Part II of Worksheet B ) ? Quote Link to comment Share on other sites More sharing options...
bertrans Posted July 15, 2014 Report Share Posted July 15, 2014 I have a client that claimed an EIC on their return, and received a letter from the IRS disallowing the credit. The client has 2 schedule C's, retirement income, social security and interest income, the schedule C's show a net loss of $75. ATX calculated the EIC based on the gross income of the schedule C's, and came up with an EIC. The IRS states that they have no earned income and disallowed the EIC. They have a disabled child which allows the EIC. Is the IRS correct? Thank you for any responses. If a person is a statutory employee, his compensation is reported on a W-2 (with the statutory employee indicator checked.) He must use Schedule C, and report the bottom line on 1040, line 7; HOWEVER, he must use his Schedule C gross receipts to compute EIC (provided the ceiling is not exceeded, etc.) Is that what happened? Quote Link to comment Share on other sites More sharing options...
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