4029 exemtion, EIC, ACTC

[Marie]

I know I've posted this before, would like to have more feedback, if possible. ATX does not give EIC or ACTC when the 4029 box is marked. My competition has been giving sometimes both, but always ACTC. She has told her clients that they are eligible when they question her. She uses TaxSlayer. Some of her clients have been receiving for several years, and IRS has not asked for this money back, she efiles and it goes through. I know if there are some wages these clients may be eligible for some EIC and ACTC, but I've been working with the ones who just have SchC and Sch F income. I want to be sure! Can anyone help me and give me resources?

[TAXBILLY]

Where is the 4029 box on the 1040?

taxbilly

[Marie]

There is no box. In ATX software, you check the 4029 box on Sch SE. When you do that "Exempt -Form 4029" appears on line 57 of the 1040. That is in the instructions if you are doing by hand- to write on that line. Look at the worksheet for earned income amounts for EIC, IRA, and Child tax credit. ATX software won't fill them in if the box is checked. I can override and the ACTC will appear on the 1040. Is ATX right or wrong?

[MAMalody]

While I have never had anybody with a 4029 I do a "ton" of clergy with a 4361. As best I can tell, by reading IRC 32, 1402 and RR 79-78, the determining factor seems to be the applicability of Social Security or SE. If it does apply, then you count that income for EIC purposes, if it does not apply, then it does not count for EIC purposes.

I think I wrote that last sentence correctly.

[Marie]

Do you think that EIC and ACTC qualifications are the same? One preparer has been giving the ACTC to these clients, she made a lot of mistakes on other things this past year and I'm getting new clients. But for me to amend, I'm telling them they are going to have to pay back, because I don't think they are eligible for this money. Who's right? Can I depend on ATX to be right?

[Lion EA]

I haven't had this situation, so I haven't researched your issues. However, I would NOT trust your software. (If your software had all the answers, why would your clients need you?!) Research yourself. Hopefully, someone will post with some direction, but you need to start looking in your research materials.

[Marie]

I have done some research. On pg 8 of PUB 972 there is a worksheet on earned income. On Line 2C "Enter any net farm profit or (loss) from Schedule F, line 36, and from farm partnerships Schedule K-1 (Form 1065), box 14, code A. Reduce this amount by any unreimbursed farm partnership expenses you deducted on Schedule E. Do not include any amounts exempt from self employment tax. " I read this as 4029 exempted SE income would not be put on this line, and without an amount, no ACTC would be allowed. But, there are tax preparers around here that are giving the ACTC on exempted SE income. This worksheet does not specifically mention 4029 exempted income like the worksheet does for the EIC. Does that mean something different, or did they just not get it in the instructions. Also, I have some 4029 clients who have been getting the EIC also. (no other income but exempted income). Why isn't IRS catching this?