Eli Posted April 15, 2009 Report Share Posted April 15, 2009 In 2007 taxpayer received taxable pension income of $3853.00. She was due a a refund of $4130 including 4010 of EIC. The EIC was given from $10000 of earned income. IRS has disallowed the EIC due to the pension income. She has received this pesnison since 1998 & had not had a problem before. Does this sound right? Thanks ELi Quote Link to comment Share on other sites More sharing options...
David1980 Posted April 15, 2009 Report Share Posted April 15, 2009 In 2007 taxpayer received taxable pension income of $3853.00. She was due a a refund of $4130 including 4010 of EIC. The EIC was given from $10000 of earned income. IRS has disallowed the EIC due to the pension income. She has received this pesnison since 1998 & had not had a problem before. Does this sound right? Thanks ELi Doesn't make sense. Pension income isn't investment income, so that wouldn't do it. It could cause them to lose EIC if the pension income pushed them past the AGI limit. Age obviously isn't an issue, with $4010 of EIC they have to have a qualifying child. Does the letter from the IRS actually say it's because of the pension income, or is that what the taxpayer says? Quote Link to comment Share on other sites More sharing options...
Eli Posted April 15, 2009 Author Report Share Posted April 15, 2009 Doesn't make sense. Pension income isn't investment income, so that wouldn't do it. It could cause them to lose EIC if the pension income pushed them past the AGI limit. Age obviously isn't an issue, with $4010 of EIC they have to have a qualifying child. Does the letter from the IRS actually say it's because of the pension income, or is that what the taxpayer says? David, thanks for your reply. I just spoke to the IRS help desk about the letter she recieved & the IRS lady said it was due to line 12a (pensions & annuities). It didnt make sense to me either. Thanks again. Eli Quote Link to comment Share on other sites More sharing options...
RoyDaleOne Posted April 16, 2009 Report Share Posted April 16, 2009 (2) EARNED INCOME. For purposes of this section, earned income is computed without regard to any community property laws which may otherwise be applicable. Earned income is reduced by any net loss in earnings from self-employment. Earned income does not include amounts received as a pension, an annuity, unemployment compensation, or workmen's compensation, or an amount to which section 871(a) and the regulations thereunder apply (relating to income of nonresident alien individuals not connected with United States business). Reg 1.32-2 Quote Link to comment Share on other sites More sharing options...
David1980 Posted April 16, 2009 Report Share Posted April 16, 2009 (2) EARNED INCOME. For purposes of this section, earned income is computed without regard to any community property laws which may otherwise be applicable. Earned income is reduced by any net loss in earnings from self-employment. Earned income does not include amounts received as a pension, an annuity, unemployment compensation, or workmen's compensation, or an amount to which section 871(a) and the regulations thereunder apply (relating to income of nonresident alien individuals not connected with United States business). Reg 1.32-2 Well it's not earned income, but the pension was only $3853 and the EIC was based on $10,000 of earned income. Even if the preparer did include the pension as earned income (I doubt it) when calculating EIC, there would still be another $6,000 of earned income for EIC. So I still do not see how the presence of $3,853 of pension income would disqualify the taxpayer from EIC. Quote Link to comment Share on other sites More sharing options...
Julie Posted April 17, 2009 Report Share Posted April 17, 2009 Single, no kids? 13k is too much gross income for EIC. Quote Link to comment Share on other sites More sharing options...
David1980 Posted April 17, 2009 Report Share Posted April 17, 2009 Single, no kids? 13k is too much gross income for EIC. Unless there's a gross miscalculation, the EIC for someone with no kids wouldn't be $4010. :) Quote Link to comment Share on other sites More sharing options...
TAXBILLY Posted April 17, 2009 Report Share Posted April 17, 2009 Eli, If you can give us all of the facts we may be able to solve the mystery. Pension income, for example, is considered earned income if it's due to disability (code 3, box 7) AND the taxpayer is below minimum retirement age (there is a box to check there). taxbilly Quote Link to comment Share on other sites More sharing options...
Eli Posted April 17, 2009 Author Report Share Posted April 17, 2009 Eli, If you can give us all of the facts we may be able to solve the mystery. Pension income, for example, is considered earned income if it's due to disability (code 3, box 7) AND the taxpayer is below minimum retirement age (there is a box to check there). taxbilly Not at the home office now, but The figures as I remember are: 10000 earned income, plus 3853 of pension income, 2 kids (eic qualified) Eli Quote Link to comment Share on other sites More sharing options...
Cathy Posted April 17, 2009 Report Share Posted April 17, 2009 In 2007 taxpayer received taxable pension income of $3853.00. She was due a a refund of $4130 including 4010 of EIC. The EIC was given from $10000 of earned income. IRS has disallowed the EIC due to the pension income. She has received this pesnison since 1998 & had not had a problem before. Does this sound right? Thanks ELi Eli, Don't let it bother you at the moment.....get the client to come in to your office to verify to IRS that you can talk to them over the phone. Of course a POA will work also, but having the client in your office will be much quicker. I have NEVER seen so many letters from IRS issued in COMPLETE error as letters received by some of my clients this year. It sounds like whoever looked at the return didn't know their a_ _ from a hole in the ground. Sorry, but it has just been SO frustrating this year.... Cathy Quote Link to comment Share on other sites More sharing options...
joanmcq Posted April 17, 2009 Report Share Posted April 17, 2009 Is pension considered investment income? Just coming in off the top of my head here. Quote Link to comment Share on other sites More sharing options...
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