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1040x Example

1040x example 36. 1040x example   Earned Income Credit (EIC) Table of Contents What's New Reminders Introduction Useful Items - You may want to see: Do You Qualify for the Credit?If Improper Claim Made in Prior Year Part A. 1040x example Rules for EveryoneRule 1. 1040x example Your AGI Must Be Less Than: Rule 2. 1040x example You Must Have a Valid Social Security Number (SSN) Rule 3. 1040x example Your Filing Status Cannot Be Married Filing Separately Rule 4. 1040x example You Must Be a U. 1040x example S. 1040x example Citizen or Resident Alien All Year Rule 5. 1040x example You Cannot File Form 2555 or Form 2555-EZ Rule 6. 1040x example Your Investment Income Must Be $3,300 or Less Rule 7. 1040x example You Must Have Earned Income Part B. 1040x example Rules If You Have a Qualifying ChildRule 8. 1040x example Your Child Must Meet the Relationship, Age, Residency, and Joint Return Tests Rule 9. 1040x example Your Qualifying Child Cannot Be Used By More Than One Person To Claim the EIC Rule 10. 1040x example You Cannot Be a Qualifying Child of Another Taxpayer Part C. 1040x example Rules If You Do Not Have a Qualifying ChildRule 11. 1040x example You Must Be at Least Age 25 but Under Age 65 Rule 12. 1040x example You Cannot Be the Dependent of Another Person Rule 13. 1040x example You Cannot Be a Qualifying Child of Another Taxpayer Rule 14. 1040x example You Must Have Lived in the United States More Than Half of the Year Part D. 1040x example Figuring and Claiming the EICRule 15. 1040x example Your Earned Income Must Be Less Than: IRS Will Figure the EIC for You How To Figure the EIC Yourself ExamplesExample 1. 1040x example John and Janet Smith (Form 1040A) Example 2. 1040x example Kelly Green (Form 1040EZ) What's New Earned income amount is more. 1040x example  The maximum amount of income you can earn and still get the credit has increased. 1040x example You may be able to take the credit if: You have three or more qualifying children and you earned less than $46,227 ($51,567 if married filing jointly), You have two qualifying children and you earned less than $43,038 ($48,378 if married filing jointly), You have one qualifying child and you earned less than $37,870 ($43,210 if married filing jointly), or You do not have a qualifying child and you earned less than $14,340 ($19,680 if married filing jointly). 1040x example Your adjusted gross income also must be less than the amount in the above list that applies to you. 1040x example For details, see Rules 1 and 15. 1040x example Investment income amount is more. 1040x example  The maximum amount of investment income you can have and still get the credit has increased to $3,300. 1040x example See Rule 6. 1040x example Reminders Increased EIC on certain joint returns. 1040x example  A married person filing a joint return may get more EIC than someone with the same income but a different filing status. 1040x example As a result, the EIC table has different columns for married persons filing jointly than for everyone else. 1040x example When you look up your EIC in the EIC Table, be sure to use the correct column for your filing status and the number of children you have. 1040x example Online help. 1040x example  You can use the EITC Assistant at www. 1040x example irs. 1040x example gov/eitc to find out if you are eligible for the credit. 1040x example The EITC Assistant is available in English and Spanish. 1040x example EIC questioned by IRS. 1040x example  The IRS may ask you to provide documents to prove you are entitled to claim the EIC. 1040x example We will tell you what documents to send us. 1040x example These may include: birth certificates, school records, medical records, etc. 1040x example The process of establishing your eligibility will delay your refund. 1040x example Introduction The earned income credit (EIC) is a tax credit for certain people who work and have less than $51,567 of earned income. 1040x example A tax credit usually means more money in your pocket. 1040x example It reduces the amount of tax you owe. 1040x example The EIC may also give you a refund. 1040x example How do you get the earned income credit?   To claim the EIC, you must: Qualify by meeting certain rules, and File a tax return, even if you: Do not owe any tax, Did not earn enough money to file a return, or Did not have income taxes withheld from your pay. 1040x example When you complete your return, you can figure your EIC by using a worksheet in the instructions for Form 1040, Form 1040A, or Form 1040EZ. 1040x example Or, if you prefer, you can let the IRS figure the credit for you. 1040x example How will this chapter help you?   This chapter will explain the following. 1040x example The rules you must meet to qualify for the EIC. 1040x example How to figure the EIC. 1040x example Useful Items - You may want to see: Publication 596 Earned Income Credit (EIC) Form (and Instructions) Schedule EIC Earned Income Credit (Qualifying Child Information) 8862 Information To Claim Earned Income Credit After Disallowance Do You Qualify for the Credit? To qualify to claim the EIC, you must first meet all of the rules explained in Part A, Rules for Everyone . 1040x example Then you must meet the rules in Part B, Rules If You Have a Qualifying Child , or Part C, Rules If You Do Not Have a Qualifying Child . 1040x example There is one final rule you must meet in Part D, Figuring and Claiming the EIC . 1040x example You qualify for the credit if you meet all the rules in each part that applies to you. 1040x example If you have a qualifying child, the rules in Parts A, B, and D apply to you. 1040x example If you do not have a qualifying child, the rules in Parts A, C, and D apply to you. 1040x example Table 36-1, Earned Income Credit in a Nutshell. 1040x example   Use Table 36–1 as a guide to Parts A, B, C, and D. 1040x example The table is a summary of all the rules in each part. 1040x example Do you have a qualifying child?   You have a qualifying child only if you have a child who meets the four tests described in Rule 8 and illustrated in Figure 36–1. 1040x example If Improper Claim Made in Prior Year If your EIC for any year after 1996 was denied or reduced for any reason other than a math or clerical error, you must attach a completed Form 8862 to your next tax return to claim the EIC. 1040x example You must also qualify to claim the EIC by meeting all the rules described in this chapter. 1040x example However, if your EIC was denied or reduced as a result of a math or clerical error, do not attach Form 8862 to your next tax return. 1040x example For example, if your arithmetic is incorrect, the IRS can correct it. 1040x example If you do not provide a correct social security number, the IRS can deny the EIC. 1040x example These kinds of errors are called math or clerical errors. 1040x example If your EIC for any year after 1996 was denied and it was determined that your error was due to reckless or intentional disregard of the EIC rules, then you cannot claim the EIC for the next 2 years. 1040x example If your error was due to fraud, then you cannot claim the EIC for the next 10 years. 1040x example More information. 1040x example   See chapter 5 in Publication 596 for more detailed information about the disallowance period and Form 8862. 1040x example Part A. 1040x example Rules for Everyone This part of the chapter discusses Rules 1 through 7. 1040x example You must meet all seven rules to qualify for the earned income credit. 1040x example If you do not meet all seven rules, you cannot get the credit and you do not need to read the rest of the chapter. 1040x example If you meet all seven rules in this part, then read either Part B or Part C (whichever applies) for more rules you must meet. 1040x example Rule 1. 1040x example Your AGI Must Be Less Than: $46,227 ($51,567 for married filing jointly) if you have three or more qualifying children, $43,038 ($48,378 for married filing jointly) if you have two qualifying children, $37,870 ($43,210 for married filing jointly) if you have one qualifying child, or $14,340 ($19,680 for married filing jointly) if you do not have a qualifying child. 1040x example Adjusted gross income (AGI). 1040x example   AGI is the amount on line 38 (Form 1040), line 22 (Form 1040A), or line 4 (Form 1040EZ). 1040x example If your AGI is equal to or more than the applicable limit listed above, you cannot claim the EIC. 1040x example Example. 1040x example Your AGI is $38,550, you are single, and you have one qualifying child. 1040x example You cannot claim the EIC because your AGI is not less than $37,870. 1040x example However, if your filing status was married filing jointly, you might be able to claim the EIC because your AGI is less than $43,210. 1040x example Community property. 1040x example   If you are married, but qualify to file as head of household under special rules for married taxpayers living apart (see Rule 3 ), and live in a state that has community property laws, your AGI includes that portion of both your and your spouse's wages that you are required to include in gross income. 1040x example This is different from the community property rules that apply under Rule 7 . 1040x example Rule 2. 1040x example You Must Have a Valid Social Security Number (SSN) To claim the EIC, you (and your spouse, if filing a joint return) must have a valid SSN issued by the Social Security Administration (SSA). 1040x example Any qualifying child listed on Schedule EIC also must have a valid SSN. 1040x example (See Rule 8 if you have a qualifying child. 1040x example ) If your social security card (or your spouse's, if filing a joint return) says “Not valid for employment” and your SSN was issued so that you (or your spouse) could get a federally funded benefit, you cannot get the EIC. 1040x example An example of a federally funded benefit is Medicaid. 1040x example If you have a card with the legend “Not valid for employment” and your immigration status has changed so that you are now a U. 1040x example S. 1040x example citizen or permanent resident, ask the SSA for a new social security card without the legend. 1040x example U. 1040x example S. 1040x example citizen. 1040x example   If you were a U. 1040x example S. 1040x example citizen when you received your SSN, you have a valid SSN. 1040x example Valid for work only with INS or DHS authorization. 1040x example   If your social security card reads “Valid for work only with INS authorization” or “Valid for work only with DHS authorization,” you have a valid SSN, but only if that authorization is still valid. 1040x example SSN missing or incorrect. 1040x example   If an SSN for you or your spouse is missing from your tax return or is incorrect, you may not get the EIC. 1040x example Other taxpayer identification number. 1040x example   You cannot get the EIC if, instead of an SSN, you (or your spouse, if filing a joint return) have an individual taxpayer identification number (ITIN). 1040x example ITINs are issued by the Internal Revenue Service to noncitizens who cannot get an SSN. 1040x example No SSN. 1040x example   If you do not have a valid SSN, put “No” next to line 64a (Form 1040), line 38a (Form 1040A), or line 8a (Form 1040EZ). 1040x example You cannot claim the EIC. 1040x example Getting an SSN. 1040x example   If you (or your spouse, if filing a joint return) do not have an SSN, you can apply for one by filing Form SS-5, Application for a Social Security Card, with the SSA. 1040x example You can get Form SS-5 online at www. 1040x example socialsecurity. 1040x example gov, from your local SSA office, or by calling the SSA at 1-800-772-1213. 1040x example Filing deadline approaching and still no SSN. 1040x example   If the filing deadline is approaching and you still do not have an SSN, you have two choices. 1040x example Request an automatic 6-month extension of time to file your return. 1040x example You can get this extension by filing Form 4868, Application for Automatic Extension of Time to File U. 1040x example S. 1040x example Individual Income Tax Return. 1040x example For more information, see chapter 1 . 1040x example File the return on time without claiming the EIC. 1040x example After receiving the SSN, file an amended return (Form 1040X, Amended U. 1040x example S. 1040x example Individual Income Tax Return) claiming the EIC. 1040x example Attach a filled-in Schedule EIC if you have a qualifying child. 1040x example Table 36-1. 1040x example Earned Income Credit in a Nutshell First, you must meet all the rules in this column. 1040x example Second, you must meet all the rules in one of these columns, whichever applies. 1040x example Third, you must meet the rule in this column. 1040x example Part A. 1040x example  Rules for Everyone Part B. 1040x example  Rules If You Have a Qualifying Child Part C. 1040x example  Rules If You Do Not Have a Qualifying Child Part D. 1040x example  Figuring and Claiming the EIC 1. 1040x example Your adjusted gross income (AGI) must be less than: • $46,227 ($51,567 for married filing jointly) if you have three or more qualifying children,  • $43,038 ($48,378 for married filing jointly) if you have two qualifying children,  • $37,870 ($43,210 for married filing jointly) if you have one qualifying child, or   • $14,340 ($19,680 for married filing jointly) if you do not have a qualifying child. 1040x example 2. 1040x example You must have a valid social security number. 1040x example  3. 1040x example Your filing status cannot be “Married filing separately. 1040x example ” 4. 1040x example You must be a U. 1040x example S. 1040x example citizen or resident alien all year. 1040x example  5. 1040x example You cannot file Form 2555 or Form 2555-EZ (relating to foreign earned income). 1040x example  6. 1040x example Your investment income must be $3,300 or less. 1040x example  7. 1040x example You must have earned income. 1040x example 8. 1040x example Your child must meet the relationship, age, residency, and joint return tests. 1040x example  9. 1040x example Your qualifying child cannot be used by more than one person to claim the EIC. 1040x example  10. 1040x example You cannot be a qualifying child of another person. 1040x example 11. 1040x example You must be at least age 25 but under age 65. 1040x example  12. 1040x example You cannot be the dependent of another person. 1040x example  13. 1040x example You cannot be a qualifying child of another person. 1040x example  14. 1040x example You must have lived in the United States more than half of the year. 1040x example 15. 1040x example Your earned income must be less than: • $46,227 ($51,567 for married filing jointly) if you have three or more qualifying children,  • $43,038 ($48,378 for married filing jointly) if you have two qualifying children,  • $37,870 ($43,210 for married filing jointly) if you have one qualifying child, or   • $14,340 ($19,680 for married filing jointly) if you do not have a qualifying child. 1040x example Rule 3. 1040x example Your Filing Status Cannot Be Married Filing Separately If you are married, you usually must file a joint return to claim the EIC. 1040x example Your filing status cannot be “Married filing separately. 1040x example ” Spouse did not live with you. 1040x example   If you are married and your spouse did not live in your home at any time during the last 6 months of the year, you may be able to file as head of household, instead of married filing separately. 1040x example In that case, you may be able to claim the EIC. 1040x example For detailed information about filing as head of household, see chapter 2 . 1040x example Rule 4. 1040x example You Must Be a U. 1040x example S. 1040x example Citizen or Resident Alien All Year If you (or your spouse, if married) were a nonresident alien for any part of the year, you cannot claim the earned income credit unless your filing status is married filing jointly. 1040x example You can use that filing status only if one spouse is a U. 1040x example S. 1040x example citizen or resident alien and you choose to treat the nonresident spouse as a U. 1040x example S. 1040x example resident. 1040x example If you make this choice, you and your spouse are taxed on your worldwide income. 1040x example If you (or your spouse, if married) were a nonresident alien for any part of the year and your filing status is not married filing jointly, enter “No” on the dotted line next to line 64a (Form 1040) or in the space to the left of line 38a (Form 1040A). 1040x example If you need more information on making this choice, get Publication 519, U. 1040x example S. 1040x example Tax Guide for Aliens. 1040x example Rule 5. 1040x example You Cannot File Form 2555 or Form 2555-EZ You cannot claim the earned income credit if you file Form 2555, Foreign Earned Income, or Form 2555-EZ, Foreign Earned Income Exclusion. 1040x example You file these forms to exclude income earned in foreign countries from your gross income, or to deduct or exclude a foreign housing amount. 1040x example U. 1040x example S. 1040x example possessions are not foreign countries. 1040x example See Publication 54, Tax Guide for U. 1040x example S. 1040x example Citizens and Resident Aliens Abroad, for more detailed information. 1040x example Rule 6. 1040x example Your Investment Income Must Be $3,300 or Less You cannot claim the earned income credit unless your investment income is $3,300 or less. 1040x example If your investment income is more than $3,300, you cannot claim the credit. 1040x example For most people, investment income is the total of the following amounts. 1040x example Taxable interest (line 8a of Form 1040 or 1040A). 1040x example Tax-exempt interest (line 8b of Form 1040 or 1040A). 1040x example Dividend income (line 9a of Form 1040 or 1040A). 1040x example Capital gain net income (line 13 of Form 1040, if more than zero, or line 10 of Form 1040A). 1040x example If you file Form 1040EZ, your investment income is the total of the amount of line 2 and the amount of any tax-exempt interest you wrote to the right of the words “Form 1040EZ” on line 2. 1040x example However, see Rule 6 in chapter 1 of Publication 596 if: You are filing Schedule E (Form 1040), Form 4797, or Form 8814, or You are reporting income from the rental of personal property on Form 1040, line 21. 1040x example Rule 7. 1040x example You Must Have Earned Income This credit is called the “earned income” credit because, to qualify, you must work and have earned income. 1040x example If you are married and file a joint return, you meet this rule if at least one spouse works and has earned income. 1040x example If you are an employee, earned income includes all the taxable income you get from your employer. 1040x example If you are self-employed or a statutory employee, you will figure your earned income on EIC Worksheet B in the instructions for Form 1040. 1040x example Earned Income Earned income includes all of the following types of income. 1040x example Wages, salaries, tips, and other taxable employee pay. 1040x example Employee pay is earned income only if it is taxable. 1040x example Nontaxable employee pay, such as certain dependent care benefits and adoption benefits, is not earned income. 1040x example But there is an exception for nontaxable combat pay, which you can choose to include in earned income, as explained below. 1040x example Net earnings from self-employment. 1040x example Gross income received as a statutory employee. 1040x example Wages, salaries, and tips. 1040x example   Wages, salaries, and tips you receive for working are reported to you on Form W-2, in box 1. 1040x example You should report these on line 1 (Form 1040EZ) or line 7 (Forms 1040A and 1040). 1040x example Nontaxable combat pay election. 1040x example   You can elect to include your nontaxable combat pay in earned income for the earned income credit. 1040x example Electing to include nontaxable combat pay in earned income may increase or decrease your EIC. 1040x example Figure the credit with and without your nontaxable combat pay before making the election. 1040x example   If you make the election, you must include in earned income all nontaxable combat pay you received. 1040x example If you are filing a joint return and both you and your spouse received nontaxable combat pay, you can each make your own election. 1040x example In other words, if one of you makes the election, the other one can also make it but does not have to. 1040x example   The amount of your nontaxable combat pay should be shown in box 12 of your Form W-2 with code “Q. 1040x example ” Self-employed persons and statutory employees. 1040x example   If you are self-employed or received income as a statutory employee, you must use the Form 1040 instructions to see if you qualify to get the EIC. 1040x example Approved Form 4361 or Form 4029 This section is for persons who have an approved: Form 4361, Application for Exemption From Self-Employment Tax for Use by Ministers, Members of Religious Orders and Christian Science Practitioners, or Form 4029, Application for Exemption From Social Security and Medicare Taxes and Waiver of Benefits. 1040x example Each approved form exempts certain income from social security taxes. 1040x example Each form is discussed here in terms of what is or is not earned income for the EIC. 1040x example Form 4361. 1040x example   Whether or not you have an approved Form 4361, amounts you received for performing ministerial duties as an employee count as earned income. 1040x example This includes wages, salaries, tips, and other taxable employee compensation. 1040x example A nontaxable housing allowance or the nontaxable rental value of a home is not earned income. 1040x example Also, amounts you received for performing ministerial duties, but not as an employee, do not count as earned income. 1040x example Examples include fees for performing marriages and honoraria for delivering speeches. 1040x example Form 4029. 1040x example   Whether or not you have an approved Form 4029, all wages, salaries, tips, and other taxable employee compensation count as earned income. 1040x example However, amounts you received as a self-employed individual do not count as earned income. 1040x example Also, in figuring earned income, do not subtract losses on Schedule C, C-EZ, or F from wages on line 7 of Form 1040. 1040x example Disability Benefits If you retired on disability, taxable benefits you receive under your employer's disability retirement plan are considered earned income until you reach minimum retirement age. 1040x example Minimum retirement age generally is the earliest age at which you could have received a pension or annuity if you were not disabled. 1040x example You must report your taxable disability payments on line 7 of either Form 1040 or Form 1040A until you reach minimum retirement age. 1040x example Beginning on the day after you reach minimum retirement age, payments you receive are taxable as a pension and are not considered earned income. 1040x example Report taxable pension payments on Form 1040, lines 16a and 16b (or Form 1040A, lines 12a and 12b). 1040x example Disability insurance payments. 1040x example   Payments you received from a disability insurance policy that you paid the premiums for are not earned income. 1040x example It does not matter whether you have reached minimum retirement age. 1040x example If this policy is through your employer, the amount may be shown in box 12 of your Form W-2 with code “J. 1040x example ” Income That Is Not Earned Income Examples of items that are not earned income include interest and dividends, pensions and annuities, social security and railroad retirement benefits (including disability benefits), alimony and child support, welfare benefits, workers' compensation benefits, unemployment compensation (insurance), nontaxable foster care payments, and veterans' benefits, including VA rehabilitation payments. 1040x example Do not include any of these items in your earned income. 1040x example Earnings while an inmate. 1040x example   Amounts received for work performed while an inmate in a penal institution are not earned income when figuring the earned income credit. 1040x example This includes amounts for work performed while in a work release program or while in a halfway house. 1040x example Workfare payments. 1040x example   Nontaxable workfare payments are not earned income for the EIC. 1040x example These are cash payments certain people receive from a state or local agency that administers public assistance programs funded under the federal Temporary Assistance for Needy Families (TANF) program in return for certain work activities such as (1) work experience activities (including remodeling or repairing public housing) if private sector employment is not available, or (2) community service program activities. 1040x example Community property. 1040x example   If you are married, but qualify to file as head of household under special rules for married taxpayers living apart (see Rule 3 ), and live in a state that has community property laws, your earned income for the EIC does not include any amount earned by your spouse that is treated as belonging to you under those laws. 1040x example That amount is not earned income for the EIC, even though you must include it in your gross income on your income tax return. 1040x example Your earned income includes the entire amount you earned, even if part of it is treated as belonging to your spouse under your state's community property laws. 1040x example Nevada, Washington, and California domestic partners. 1040x example   If you are a registered domestic partner in Nevada, Washington, or California, the same rules apply. 1040x example Your earned income for the EIC does not include any amount earned by your partner. 1040x example Your earned income includes the entire amount you earned. 1040x example For details, see Publication 555. 1040x example Conservation Reserve Program (CRP) payments. 1040x example   If you were receiving social security retirement benefits or social security disability benefits at the time you received any CRP payments, your CRP payments are not earned income for the EIC. 1040x example Nontaxable military pay. 1040x example   Nontaxable pay for members of the Armed Forces is not considered earned income for the EIC. 1040x example Examples of nontaxable military pay are combat pay, the Basic Allowance for Housing (BAH), and the Basic Allowance for Subsistence (BAS). 1040x example See Publication 3, Armed Forces' Tax Guide, for more information. 1040x example    Combat pay. 1040x example You can elect to include your nontaxable combat pay in earned income for the EIC. 1040x example See Nontaxable combat pay election, earlier. 1040x example Part B. 1040x example Rules If You Have a Qualifying Child If you have met all of the rules in Part A , read Part B to see if you have a qualifying child. 1040x example Part B discusses Rules 8 through 10. 1040x example You must meet all three of these rules, in addition to the rules in Parts A and D , to qualify for the earned income credit with a qualifying child. 1040x example You must file Form 1040 or Form 1040A to claim the EIC with a qualifying child. 1040x example (You cannot file Form 1040EZ. 1040x example ) You also must complete Schedule EIC and attach it to your return. 1040x example If you meet all the rules in Part A and this part, read Part D to find out what to do next. 1040x example If you do not meet Rule 8, you do not have a qualifying child. 1040x example Read Part C to find out if you can get the earned income credit without a qualifying child. 1040x example Rule 8. 1040x example Your Child Must Meet the Relationship, Age, Residency, and Joint Return Tests Your child is a qualifying child if your child meets four tests. 1040x example The four tests are: Relationship, Age, Residency, and Joint return. 1040x example The four tests are illustrated in Figure 36–1. 1040x example The paragraphs that follow contain more information about each test. 1040x example Relationship Test To be your qualifying child, a child must be your: Son, daughter, stepchild, foster child, or a descendant of any of them (for example, your grandchild), or Brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant of any of them (for example, your niece or nephew). 1040x example The following definitions clarify the relationship test. 1040x example Adopted child. 1040x example   An adopted child is always treated as your own child. 1040x example The term “adopted child” includes a child who was lawfully placed with you for legal adoption. 1040x example Foster child. 1040x example   For the EIC, a person is your foster child if the child is placed with you by an authorized placement agency or by judgement, decree, or other order of any court of competent jurisdiction. 1040x example An authorized placement agency includes a state or local government agency. 1040x example It also includes a tax-exempt organization licensed by a state. 1040x example In addition, it includes an Indian tribal government or an organization authorized by an Indian tribal government to place Indian children. 1040x example Example. 1040x example Debbie, who is 12 years old, was placed in your care 2 years ago by an authorized agency responsible for placing children in foster homes. 1040x example Debbie is your foster child. 1040x example Age Test Your child must be: Under age 19 at the end of 2013 and younger than you (or your spouse, if filing jointly), Under age 24 at the end of 2013, a student, and younger than you (or your spouse, if filing jointly), or Permanently and totally disabled at any time during 2013, regardless of age. 1040x example    The following examples and definitions clarify the age test. 1040x example Example 1—child not under age 19. 1040x example Your son turned 19 on December 10. 1040x example Unless he was permanently and totally disabled or a student, he is not a qualifying child because, at the end of the year, he was not under age 19. 1040x example Example 2—child not younger than you or your spouse. 1040x example Your 23-year-old brother, who is a full-time student and unmarried, lives with you and your spouse. 1040x example He is not disabled. 1040x example Both you and your spouse are 21 years old and you file a joint return. 1040x example Your brother is not your qualifying child because he is not younger than you or your spouse. 1040x example Example 3—child younger than your spouse but not younger than you. 1040x example The facts are the same as in Example 2 except that your spouse is 25 years old. 1040x example Because your brother is younger than your spouse, he is your qualifying child even though he is not younger than you. 1040x example Student defined. 1040x example   To qualify as a student, your child must be, during some part of each of any 5 calendar months during the calendar year: A full-time student at a school that has a regular teaching staff, course of study, and regular student body at the school, or A student taking a full-time, on-farm training course given by a school described in (1), or a state, county, or local government. 1040x example The 5 calendar months need not be consecutive. 1040x example   A full-time student is a student who is enrolled for the number of hours or courses the school considers to be full-time attendance. 1040x example School defined. 1040x example   A school can be an elementary school, junior or senior high school, college, university, or technical, trade, or mechanical school. 1040x example However, on-the-job training courses, correspondence schools, and schools offering courses only through the Internet do not count as schools for the EIC. 1040x example Vocational high school students. 1040x example   Students who work in co-op jobs in private industry as a part of a school's regular course of classroom and practical training are considered full-time students. 1040x example Permanently and totally disabled. 1040x example   Your child is permanently and totally disabled if both of the following apply. 1040x example He or she cannot engage in any substantial gainful activity because of a physical or mental condition. 1040x example A doctor determines the condition has lasted or can be expected to last continuously for at least a year or can lead to death. 1040x example Residency Test Your child must have lived with you in the United States for more than half of 2013. 1040x example The following definitions clarify the residency test. 1040x example United States. 1040x example   This means the 50 states and the District of Columbia. 1040x example It does not include Puerto Rico or U. 1040x example S. 1040x example possessions such as Guam. 1040x example Homeless shelter. 1040x example   Your home can be any location where you regularly live. 1040x example You do not need a traditional home. 1040x example For example, if your child lived with you for more than half the year in one or more homeless shelters, your child meets the residency test. 1040x example Military personnel stationed outside the United States. 1040x example    U. 1040x example S. 1040x example military personnel stationed outside the United States on extended active duty are considered to live in the United States during that duty period for purposes of the EIC. 1040x example Figure 36-1. 1040x example Tests for Qualifying Child Please click here for the text description of the image. 1040x example Qualifying child Extended active duty. 1040x example   Extended active duty means you are called or ordered to duty for an indefinite period or for a period of more than 90 days. 1040x example Once you begin serving your extended active duty, you are still considered to have been on extended active duty even if you do not serve more than 90 days. 1040x example Birth or death of a child. 1040x example   A child who was born or died in 2013 is treated as having lived with you for more than half of 2013 if your home was the child's home for more than half the time he or she was alive in 2013. 1040x example Temporary absences. 1040x example   Count time that you or your child is away from home on a temporary absence due to a special circumstance as time the child lived with you. 1040x example Examples of a special circumstance include illness, school attendance, business, vacation, military service, and detention in a juvenile facility. 1040x example Kidnapped child. 1040x example    A kidnapped child is treated as living with you for more than half of the year if the child lived with you for more than half the part of the year before the date of the kidnapping. 1040x example The child must be presumed by law enforcement authorities to have been kidnapped by someone who is not a member of your family or your child's family. 1040x example This treatment applies for all years until the child is returned. 1040x example However, the last year this treatment can apply is the earlier of: The year there is a determination that the child is dead, or The year the child would have reached age 18. 1040x example   If your qualifying child has been kidnapped and meets these requirements, enter “KC,” instead of a number, on line 6 of Schedule EIC. 1040x example Joint Return Test To meet this test, the child cannot file a joint return for the year. 1040x example Exception. 1040x example   An exception to the joint return test applies if your child and his or her spouse file a joint return only to claim a refund of income tax withheld or estimated tax paid. 1040x example Example 1—child files joint return. 1040x example You supported your 18-year-old daughter, and she lived with you all year while her husband was in the Armed Forces. 1040x example He earned $25,000 for the year. 1040x example The couple files a joint return. 1040x example Because your daughter and her husband filed a joint return, she is not your qualifying child. 1040x example Example 2—child files joint return only to claim a refund of withheld tax. 1040x example Your 18-year-old son and his 17-year-old wife had $800 of wages from part-time jobs and no other income. 1040x example They do not have a child. 1040x example Neither is required to file a tax return. 1040x example Taxes were taken out of their pay, so they filed a joint return only to get a refund of the withheld taxes. 1040x example The exception to the joint return test applies, so your son may be your qualifying child if all the other tests are met. 1040x example Example 3—child files joint return to claim American opportunity credit. 1040x example The facts are the same as in Example 2 except no taxes were taken out of your son's pay. 1040x example He and his wife are not required to file a tax return, but they file a joint return to claim an American opportunity credit of $124 and get a refund of that amount. 1040x example Because claiming the American opportunity credit is their reason for filing the return, they are not filing it only to get a refund of income tax withheld or estimated tax paid. 1040x example The exception to the joint return test does not apply, so your son is not your qualifying child. 1040x example Married child. 1040x example   Even if your child does not file a joint return, if your child was married at the end of the year, he or she cannot be your qualifying child unless: You can claim an exemption for the child, or The reason you cannot claim an exemption for the child is that you let the child's other parent claim the exemption under the Special rule for divorced or separated parents (or parents who live apart) , described later. 1040x example Social security number. 1040x example   The qualifying child must have a valid social security number (SSN) unless the child was born and died in 2013 and you attach to your return a copy of the child's birth certificate, death certificate, or hospital records showing a live birth. 1040x example You cannot claim the EIC on the basis of a qualifying child if: The qualifying child's SSN is missing from your tax return or is incorrect, The qualifying child's social security card says “Not valid for employment” and was issued for use in getting a federally funded benefit, or Instead of an SSN, the qualifying child has: An individual taxpayer identification number (ITIN), which is issued to a noncitizen who cannot get an SSN, or An adoption taxpayer identification number (ATIN), which is issued to adopting parents who cannot get an SSN for the child being adopted until the adoption is final. 1040x example   If you have more than one qualifying child and only one has a valid SSN, you can use only that child to claim the EIC. 1040x example For more information about SSNs, see Rule 2 . 1040x example Rule 9. 1040x example Your Qualifying Child Cannot Be Used By More Than One Person To Claim the EIC Sometimes a child meets the tests to be a qualifying child of more than one person. 1040x example However, only one of these persons can actually treat the child as a qualifying child. 1040x example Only that person can use the child as a qualifying child to take all of the following tax benefits (provided the person is eligible for each benefit). 1040x example The exemption for the child. 1040x example The child tax credit. 1040x example Head of household filing status. 1040x example The credit for child and dependent care expenses. 1040x example The exclusion for dependent care benefits. 1040x example The EIC. 1040x example The other person cannot take any of these benefits based on this qualifying child. 1040x example In other words, you and the other person cannot agree to divide these tax benefits between you. 1040x example The other person cannot take any of these tax benefits unless he or she has a different qualifying child. 1040x example The tiebreaker rules explained next explain who, if anyone, can claim the EIC when more than one person has the same qualifying child. 1040x example However, the tiebreaker rules do not apply if the other person is your spouse and you file a joint return. 1040x example Tiebreaker rules. 1040x example   To determine which person can treat the child as a qualifying child to claim the six tax benefits just listed, the following tiebreaker rules apply. 1040x example If only one of the persons is the child's parent, the child is treated as the qualifying child of the parent. 1040x example If the parents file a joint return together and can claim the child as a qualifying child, the child is treated as the qualifying child of the parents. 1040x example If the parents do not file a joint return together but both parents claim the child as a qualifying child, the IRS will treat the child as the qualifying child of the parent with whom the child lived for the longer period of time during the year. 1040x example If the child lived with each parent for the same amount of time, the IRS will treat the child as the qualifying child of the parent who had the higher adjusted gross income (AGI) for the year. 1040x example If no parent can claim the child as a qualifying child, the child is treated as the qualifying child of the person who had the highest AGI for the year. 1040x example If a parent can claim the child as a qualifying child but no parent does so claim the child, the child is treated as the qualifying child of the person who had the highest AGI for the year, but only if that person's AGI is higher than the highest AGI of any of the child's parents who can claim the child. 1040x example If the child's parents file a joint return with each other, this rule can be applied by treating the parents' total AGI as divided evenly between them. 1040x example See Example 8 . 1040x example   Subject to these tiebreaker rules, you and the other person may be able to choose which of you claims the child as a qualifying child. 1040x example See Examples 1 through 13 . 1040x example   If you cannot claim the EIC because your qualifying child is treated under the tiebreaker rules as the qualifying child of another person for 2013, you may be able to take the EIC using a different qualifying child, but you cannot take the EIC using the rules in Part C for people who do not have a qualifying child. 1040x example If the other person cannot claim the EIC. 1040x example   If you and someone else have the same qualifying child but the other person cannot claim the EIC because he or she is not eligible or his or her earned income or AGI is too high, you may be able to treat the child as a qualifying child. 1040x example See Examples 6 and 7 . 1040x example But you cannot treat the child as a qualifying child to claim the EIC if the other person uses the child to claim any of the other six tax benefits listed earlier. 1040x example Examples. 1040x example The following examples may help you in determining whether you can claim the EIC when you and someone else have the same qualifying child. 1040x example Example 1. 1040x example You and your 2-year-old son Jimmy lived with your mother all year. 1040x example You are 25 years old, unmarried, and your AGI is $9,000. 1040x example Your only income was $9,000 from a part-time job. 1040x example Your mother's only income was $20,000 from her job, and her AGI is $20,000. 1040x example Jimmy's father did not live with you or Jimmy. 1040x example The special rule explained later for divorced or separated parents (or parents who live apart) does not apply. 1040x example Jimmy is a qualifying child of both you and your mother because he meets the relationship, age, residency, and joint return tests for both you and your mother. 1040x example However, only one of you can treat him as a qualifying child to claim the EIC (and the other tax benefits listed earlier for which that person qualifies). 1040x example He is not a qualifying child of anyone else, including his father. 1040x example If you do not claim Jimmy as a qualifying child for the EIC or any of the other tax benefits listed earlier, your mother can treat him as a qualifying child to claim the EIC (and any of the other tax benefits listed earlier for which she qualifies). 1040x example Example 2. 1040x example The facts are the same as in Example 1 except your AGI is $25,000. 1040x example Because your mother's AGI is not higher than yours, she cannot claim Jimmy as a qualifying child. 1040x example Only you can claim him. 1040x example Example 3. 1040x example The facts are the same as in Example 1 except that you and your mother both claim Jimmy as a qualifying child. 1040x example In this case, you as the child's parent will be the only one allowed to claim Jimmy as a qualifying child for the EIC and the other tax benefits listed earlier for which you qualify. 1040x example The IRS will disallow your mother's claim to the EIC and any of the other tax benefits listed earlier unless she has another qualifying child. 1040x example Example 4. 1040x example The facts are the same as in Example 1 except that you also have two other young children who are qualifying children of both you and your mother. 1040x example Only one of you can claim each child. 1040x example However, if your mother's AGI is higher than yours, you can allow your mother to claim one or more of the children. 1040x example For example, if you claim one child, your mother can claim the other two. 1040x example Example 5. 1040x example The facts are the same as in Example 1 except that you are only 18 years old. 1040x example This means you are a qualifying child of your mother. 1040x example Because of Rule 10 , discussed next, you cannot claim the EIC and cannot claim Jimmy as a qualifying child. 1040x example Only your mother may be able to treat Jimmy as a qualifying child to claim the EIC. 1040x example If your mother meets all the other requirements for claiming the EIC and you do not claim Jimmy as a qualifying child for any of the other tax benefits listed earlier, your mother can claim both you and Jimmy as qualifying children for the EIC. 1040x example Example 6. 1040x example The facts are the same as in Example 1 except that your mother earned $50,000 from her job. 1040x example Because your mother's earned income is too high for her to claim the EIC, only you can claim the EIC using your son. 1040x example Example 7. 1040x example The facts are the same as in Example 1 except that you earned $50,000 from your job and your AGI is $50,500. 1040x example Your earned income is too high for you to claim the EIC. 1040x example But your mother cannot claim the EIC either, because her AGI is not higher than yours. 1040x example Example 8. 1040x example The facts are the same as in Example 1 except that you and Jimmy's father are married to each other, live with Jimmy and your mother, and have an AGI of $30,000 on a joint return. 1040x example If you and your husband do not claim Jimmy as a qualifying child for the EIC or any of the other tax benefits listed earlier, your mother can claim him instead. 1040x example Even though the AGI on your joint return, $30,000, is more than your mother's AGI of $20,000, for this purpose half of the joint AGI can be treated as yours and half as your husband's. 1040x example In other words, each parent's AGI can be treated as $15,000. 1040x example Example 9. 1040x example You, your husband, and your 10-year-old son Joey lived together until August 1, 2013, when your husband moved out of the household. 1040x example In August and September, Joey lived with you. 1040x example For the rest of the year, Joey lived with your husband, who is Joey's father. 1040x example Joey is a qualifying child of both you and your husband because he lived with each of you for more than half the year and because he met the relationship, age, and joint return tests for both of you. 1040x example At the end of the year, you and your husband still were not divorced, legally separated, or separated under a written separation agreement, so the special rule for divorced or separated parents (or parents who live apart) does not apply. 1040x example You and your husband will file separate returns. 1040x example Your husband agrees to let you treat Joey as a qualifying child. 1040x example This means, if your husband does not claim Joey as a qualifying child for any of the tax benefits listed earlier, you can claim him as a qualifying child for any tax benefit listed earlier for which you qualify. 1040x example However, your filing status is married filing separately, so you cannot claim the EIC or the credit for child and dependent care expenses. 1040x example See Rule 3 . 1040x example Example 10. 1040x example The facts are the same as in Example 9 except that you and your husband both claim Joey as a qualifying child. 1040x example In this case, only your husband will be allowed to treat Joey as a qualifying child. 1040x example This is because, during 2013, the boy lived with him longer than with you. 1040x example You cannot claim the EIC (either with or without a qualifying child). 1040x example However, your husband's filing status is married filing separately, so he cannot claim the EIC or the credit for child and dependent care expenses. 1040x example See Rule 3 . 1040x example Example 11. 1040x example You, your 5-year-old son and your son's father lived together all year. 1040x example You and your son's father are not married. 1040x example Your son is a qualifying child of both you and his father because he meets the relationship, age, residency, and joint return tests for both you and his father. 1040x example Your earned income and AGI are $12,000, and your son's father's earned income and AGI are $14,000. 1040x example Neither of you had any other income. 1040x example Your son's father agrees to let you treat the child as a qualifying child. 1040x example This means, if your son's father does not claim your son as a qualifying child for the EIC or any of the other tax benefits listed earlier, you can claim him as a qualifying child for the EIC and any of the other tax benefits listed earlier for which you qualify. 1040x example Example 12. 1040x example The facts are the same as in Example 11 except that you and your son's father both claim your son as a qualifying child. 1040x example In this case, only your son's father will be allowed to treat your son as a qualifying child. 1040x example This is because his AGI, $14,000, is more than your AGI, $12,000. 1040x example You cannot claim the EIC (either with or without a qualifying child). 1040x example Example 13. 1040x example You and your 7-year-old niece, your sister's child, lived with your mother all year. 1040x example You are 25 years old, and your AGI is $9,300. 1040x example Your only income was from a part-time job. 1040x example Your mother's AGI is $15,000. 1040x example Her only income was from her job. 1040x example Your niece's parents file jointly, have an AGI of less than $9,000, and do not live with you or their child. 1040x example Your niece is a qualifying child of both you and your mother because she meets the relationship, age, residency, and joint return tests for both you and your mother. 1040x example However, only your mother can treat her as a qualifying child. 1040x example This is because your mother's AGI, $15,000, is more than your AGI, $9,300. 1040x example Special rule for divorced or separated parents (or parents who live apart). 1040x example   A child will be treated as the qualifying child of his or her noncustodial parent (for purposes of claiming an exemption and the child tax credit, but not for the EIC) if all of the following statements are true. 1040x example The parents: Are divorced or legally separated under a decree of divorce or separate maintenance, Are separated under a written separation agreement, or Lived apart at all times during the last 6 months of 2013, whether or not they are or were married. 1040x example The child received over half of his or her support for the year from the parents. 1040x example The child is in the custody of one or both parents for more than half of 2013. 1040x example Either of the following statements is true. 1040x example The custodial parent signs Form 8332 or a substantially similar statement that he or she will not claim the child as a dependent for the year, and the noncustodial parent attaches the form or statement to his or her return. 1040x example If the divorce decree or separation agreement went into effect after 1984 and before 2009, the noncustodial parent may be able to attach certain pages from the decree or agreement instead of Form 8332. 1040x example A pre-1985 decree of divorce or separate maintenance or written separation agreement that applies to 2013 provides that the noncustodial parent can claim the child as a dependent, and the noncustodial parent provides at least $600 for support of the child during 2013. 1040x example  For details, see chapter 3. 1040x example Also see Applying Rule 9 to divorced or separated parents (or parents who live apart) , next. 1040x example Applying Rule 9 to divorced or separated parents (or parents who live apart). 1040x example   If a child is treated as the qualifying child of the noncustodial parent under the special rule just described for children of divorced or separated parents (or parents who live apart), only the noncustodial parent can claim an exemption and the child tax credit for the child. 1040x example However, the custodial parent, if eligible, or another eligible taxpayer can claim the child as a qualifying child for the EIC and other tax benefits listed earlier in this chapter. 1040x example If the child is the qualifying child of more than one person for these benefits, then the tiebreaker rules determine which person can treat the child as a qualifying child. 1040x example Example 1. 1040x example You and your 5-year-old son lived all year with your mother, who paid the entire cost of keeping up the home. 1040x example Your AGI is $10,000. 1040x example Your mother’s AGI is $25,000. 1040x example Your son's father did not live with you or your son. 1040x example Under the special rule for children of divorced or separated parents (or parents who live apart), your son is treated as the qualifying child of his father, who can claim an exemption and the child tax credit for the child. 1040x example However, your son's father cannot claim your son as a qualifying child for head of household filing status, the credit for child and dependent care expenses, the exclusion for dependent care benefits, or the EIC. 1040x example You and your mother did not have any child care expenses or dependent care benefits. 1040x example If you do not claim your son as a qualifying child, your mother can claim him as a qualifying child for the EIC and head of household filing status, if she qualifies for these tax benefits. 1040x example Example 2. 1040x example The facts are the same as in Example 1 except that your AGI is $25,000 and your mother's AGI is $21,000. 1040x example Your mother cannot claim your son as a qualifying child for any purpose because her AGI is not higher than yours. 1040x example Example 3. 1040x example The facts are the same as in Example 1 except that you and your mother both claim your son as a qualifying child for the EIC. 1040x example Your mother also claims him as a qualifying child for head of household filing status. 1040x example You as the child's parent will be the only one allowed to claim your son as a qualifying child for the EIC. 1040x example The IRS will disallow your mother's claim to the EIC and head of household filing status unless she has another qualifying child. 1040x example Rule 10. 1040x example You Cannot Be a Qualifying Child of Another Taxpayer You are a qualifying child of another taxpayer (your parent, guardian, foster parent, etc. 1040x example ) if all of the following statements are true. 1040x example You are that person's son, daughter, stepchild, foster child, or a descendant of any of them. 1040x example Or, you are that person's brother, sister, half brother, half sister, stepbrother, or stepsister (or a descendant of any of them). 1040x example You were: Under age 19 at the end of the year and younger than that person (or that person's spouse, if the person files jointly), Under age 24 at the end of the year, a student, and younger than that person (or that person's spouse, if the person files jointly), or Permanently and totally disabled, regardless of age. 1040x example You lived with that person in the United States for more than half of the year. 1040x example You are not filing a joint return for the year (or are filing a joint return only to claim a refund of withheld income tax or estimated tax paid). 1040x example For more details about the tests to be a qualifying child, see Rule 8 . 1040x example If you are a qualifying child of another taxpayer, you cannot claim the EIC. 1040x example This is true even if the person for whom you are a qualifying child does not claim the EIC or meet all of the rules to claim the EIC. 1040x example Put “No” beside line 64a (Form 1040) or line 38a (Form 1040A). 1040x example Example. 1040x example You and your daughter lived with your mother all year. 1040x example You are 22 years old, unmarried, and attended a trade school full time. 1040x example You had a part-time job and earned $5,700. 1040x example You had no other income. 1040x example Because you meet the relationship, age, residency, and joint return tests, you are a qualifying child of your mother. 1040x example She can claim the EIC if she meets all the other requirements. 1040x example Because you are your mother's qualifying child, you cannot claim the EIC. 1040x example This is so even if your mother cannot or does not claim the EIC. 1040x example Child of person not required to file a return. 1040x example   You are not the qualifying child of another taxpayer (and so may qualify to claim the EIC) if the person for whom you meet the relationship, age, residency, and joint return tests is not required to file an income tax return and either: Does not file an income tax return, or Files a return only to get a refund of income tax withheld or estimated tax paid. 1040x example Example. 1040x example The facts are the same as in the last example except your mother had no gross income, is not required to file a 2013 tax return, and does not file a 2013 tax return. 1040x example As a result, you are not your mother's qualifying child. 1040x example You can claim the EIC if you meet all the other requirements to do so. 1040x example   See Rule 10 in Publication 596 for additional examples. 1040x example Part C. 1040x example Rules If You Do Not Have a Qualifying Child Read this part if you: Do not have a qualifying child, and Have met all the rules in Part A . 1040x example  Part C discusses Rules 11 through 14. 1040x example You must meet all four of these rules, in addition to the rules in Parts A and D , to qualify for the earned income credit without a qualifying child. 1040x example If you have a qualifying child, the rules in this part do not apply to you. 1040x example You can claim the credit only if you meet all the rules in Parts A, B, and D. 1040x example See Rule 8 to find out if you have a qualifying child. 1040x example Rule 11. 1040x example You Must Be at Least Age 25 but Under Age 65 You must be at least age 25 but under age 65 at the end of 2013. 1040x example If you are married filing a joint return, either you or your spouse must be at least age 25 but under age 65 at the end of 2013. 1040x example It does not matter which spouse meets the age test, as long as one of the spouses does. 1040x example You meet the age test if you were born after December 31, 1948, and before January 2, 1989. 1040x example If you are married filing a joint return, you meet the age test if either you or your spouse was born after December 31, 1948, and before January 2, 1989. 1040x example If neither you nor your spouse meets the age test, you cannot claim the EIC. 1040x example Put “No” next to line 64a (Form 1040), line 38a (Form 1040A), or line 8a (Form 1040EZ). 1040x example Death of spouse. 1040x example   If you are filing a joint return with your spouse who died in 2013, you meet the age test if your spouse was at least age 25 but under age 65 at the time of death. 1040x example Example 1. 1040x example You are age 28 and unmarried. 1040x example You meet the age test. 1040x example Example 2—spouse meets age test. 1040x example You are married and filing a joint return. 1040x example You are age 23 and your spouse is age 27. 1040x example You meet the age test because your spouse is at least age 25 but under age 65. 1040x example Example 3—spouse dies in 2013. 1040x example You are married and filing a joint return with your spouse who died in August 2013. 1040x example You are age 67. 1040x example Your spouse would have become age 65 in November 2013. 1040x example Because your spouse was under age 65 when she died, you meet the age test. 1040x example Rule 12. 1040x example You Cannot Be the Dependent of Another Person If you are not filing a joint return, you meet this rule if: You checked box 6a on Form 1040 or 1040A, or You did not check the “You” box on line 5 of Form 1040EZ, and you entered $10,000 on that line. 1040x example If you are filing a joint return, you meet this rule if: You checked both box 6a and box 6b on Form 1040 or 1040A, or You and your spouse did not check either the “You” box or the “Spouse” box on line 5 of Form 1040EZ, and you entered $20,000 on that line. 1040x example If you are not sure whether someone else can claim you (or your spouse, if filing a joint return) as a dependent, read the rules for claiming a dependent in chapter 3. 1040x example If someone else can claim you (or your spouse, if filing a joint return) as a dependent on his or her return, but does not, you still cannot claim the credit. 1040x example Example 1. 1040x example In 2013, you were age 25, single, and living at home with your parents. 1040x example You worked and were not a student. 1040x example You earned $7,500. 1040x example Your parents cannot claim you as a dependent. 1040x example When you file your return, you claim an exemption for yourself by not checking the “You” box on line 5 of your Form 1040EZ and by entering $10,000 on that line. 1040x example You meet this rule. 1040x example You can claim the EIC if you meet all the other requirements. 1040x example Example 2. 1040x example The facts are the same as in Example 1 , except that you earned $2,000. 1040x example Your parents can claim you as a dependent but decide not to. 1040x example You do not meet this rule. 1040x example You cannot claim the credit because your parents could have claimed you as a dependent. 1040x example Joint returns. 1040x example   You generally cannot be claimed as a dependent by another person if you are married and file a joint return. 1040x example   However, another person may be able to claim you as a dependent if you and your spouse file a joint return only to get a refund of income tax withheld or estimated tax paid. 1040x example But neither you nor your spouse can be claimed as a dependent by another person if you claim the EIC on your joint return. 1040x example Example 1. 1040x example You are 26 years old. 1040x example You and your wife live with your parents and had $800 of wages from part-time jobs and no other income. 1040x example Neither you nor your wife is required to file a tax return. 1040x example You do not have a child. 1040x example Taxes were taken out of your pay, so you file a joint return only to get a refund of the withheld taxes. 1040x example Your parents are not disqualified from claiming an exemption for you just because you filed a joint return. 1040x example They can claim exemptions for you and your wife if all the other tests to do so are met. 1040x example Example 2. 1040x example The facts are the same as in Example 1 except no taxes were taken out of your pay. 1040x example Also, you and your wife are not required to file a tax return, but you file a joint return to claim an EIC of $63 and get a refund of that amount. 1040x example Because claiming the EIC is your reason for filing the return, you are not filing it only to get a refund of income tax withheld or estimated tax paid. 1040x example Your parents cannot claim an exemption for either you or your wife. 1040x example Rule 13. 1040x example You Cannot Be a Qualifying Child of Another Taxpayer You are a qualifying child of another taxpayer (your parent, guardian, foster parent, etc. 1040x example ) if all of the following statements are true. 1040x example You are that person's son, daughter, stepchild, foster child, or a descendant of any of them. 1040x example Or, you are that person's brother, sister, half brother, half sister, stepbrother, or stepsister (or a descendant of any of them). 1040x example You were: Under age 19 at the end of the year and younger than that person (or that person's spouse, if the person files jointly), Under age 24 at the end of the year, a student (as defined in Rule 8 ), and younger than that person (or that person's spouse, if the person files jointly), or Permanently and totally disabled, regardless of age. 1040x example You lived with that person in the United States for more than half of the year. 1040x example You are not filing a joint return for the year (or are filing a joint return only to claim a refund of withheld income tax or estimated tax paid). 1040x example For more details about the tests to be a qualifying child, see Rule 8 . 1040x example If you are a qualifying child of another taxpayer, you cannot claim the EIC. 1040x example This is true even if the person for whom you are a qualifying child does not claim the EIC or meet all of the rules to claim the EIC. 1040x example Put “No” next to line 64a (Form 1040), line 38a (Form 1040A), or line 8a (Form 1040EZ). 1040x example Example. 1040x example You lived with your mother all year. 1040x example You are age 26, unmarried, and permanently and totally disabled. 1040x example Your only income was from a community center where you went three days a week to answer telephones. 1040x example You earned $5,000 for the year and provided more than half of your own support. 1040x example Because you meet the relationship, age, residency, and joint return tests, you are a qualifying child of your mother for the EIC. 1040x example She can claim the EIC if she meets all the other requirements. 1040x example Because you are a qualifying child of your mother, you cannot claim the EIC. 1040x example This is so even if your mother cannot or does not claim the EIC. 1040x example Joint returns. 1040x example   You generally cannot be a qualifying child of another taxpayer if you are married and file a joint return. 1040x example   However, you may be a qualifying child of another taxpayer if you and your spouse file a joint return for the year only to get a refund of income tax withheld or estimated tax paid. 1040x example But neither you nor your spouse can be a qualifying child of another taxpayer if you claim the EIC on your joint return. 1040x example Child of person not required to file a return. 1040x example   You are not the qualifying child of another taxpayer (and so may qualify to claim the EIC) if the person for whom you meet the relationship, age, residency, and joint return tests is not required to file an income tax return and either: Does not file an income tax return, or Files a return only to get a refund of income tax withheld or estimated tax paid. 1040x example Example. 1040x example You lived all year with your father. 1040x example You are 27 years old, unmarried, permanently and totally disabled, and earned $13,000. 1040x example You have no other income, no children, and provided more than half of your own support. 1040x example Your father had no gross income, is not required to file a 2013 tax return, and does not file a 2013 tax return. 1040x example As a result, you are not your father's qualifying child. 1040x example You can claim the EIC if you meet all the other requirements to do so. 1040x example   See Rule 13 in Publication 596 for additional examples. 1040x example Rule 14. 1040x example You Must Have Lived in the United States More Than Half of the Year Your home (and your spouse's, if filing a joint return) must have been in the United States for more than half the year. 1040x example If it was not, put “No” next to line 64a (Form 1040), line 38a (Form 1040A), or line 8a (Form 1040EZ). 1040x example United States. 1040x example   This means the 50 states and the District of Columbia. 1040x example It does not include Puerto Rico or U. 1040x example S. 1040x example possessions such as Guam. 1040x example Homeless shelter. 1040x example   Your home can be any location where you regularly live. 1040x example You do not need a traditional home. 1040x example If you lived in one or more homeless shelters in the United States for more than half the year, you meet this rule. 1040x example Military personnel stationed outside the United States. 1040x example   U. 1040x example S. 1040x example military personnel stationed outside the United States on extended active duty (defined in Rule 8 ) are considered to live in the United States during that duty period for purposes of the EIC. 1040x example Part D. 1040x example Figuring and Claiming the EIC Read this part if you have met all the rules in Parts A and B, or all the rules in Parts A and C. 1040x example Part D discusses Rule 15 . 1040x example You must meet this rule, in addition to the rules in Parts A and B , or Parts A and C , to qualify for the earned income credit. 1040x example This part of the chapter also explains how to figure the amount of your credit. 1040x example You have two choices. 1040x example Have the IRS figure the EIC for you. 1040x example If you want to do this, see IRS Will Figure the EIC for You . 1040x example Figure the EIC yourself. 1040x example If you want to do this, see How To Figure the EIC Yourself . 1040x example Rule 15. 1040x example Your Earned Income Must Be Less Than: $46,227 ($51,567 for married filing jointly) if you have three or more qualifying children, $43,038 ($48,378 for married filing jointly) if you have two qualifying children, $37,870 ($43,210 for married filing jointly) if you have one qualifying child, or $14,340 ($19,680 for married filing jointly) if you do not have a qualifying child. 1040x example Earned income generally means wages, salaries, tips, other taxable employee pay, and net earnings from self-employment. 1040x example Employee pay is earned income only if it is taxable. 1040x example Nontaxable employee pay, such as certain dependent care benefits and adoption benefits, is not earned income. 1040x example But there is an exception for nontaxable combat pay, which you can choose to include in earned income. 1040x example Earned income is explained in detail in Rule 7 . 1040x example Figuring earned income. 1040x example   If you are self-employed, a statutory employee, or a member of the clergy or a church employee who files Schedule SE (Form 1040), you will figure your earned income when you fill out Part 4 of EIC Worksheet B in the Form 1040 instructions. 1040x example   Otherwise, figure your earned income by using the worksheet in Step 5 of the Form 1040 instructions for lines 64a and 64b or the Form 1040A instructions for lines 38a and 38b, or the worksheet in Step 2 of the Form 1040EZ instructions for lines 8a and 8b. 1040x example   When using one of those worksheets to figure your earned income, you will start with the amount on line 7 (Form 1040 or Form 1040A) or line 1 (Form 1040EZ). 1040x example You will then reduce that amount by any amount included on that line and described in the following list: Scholarship or fellowship grants not reported on a Form W-2, Inmate's income, and Pension or annuity from deferred compensation plans. 1040x example Scholarship or fellowship grants not reported on a Form W-2. 1040x example   A scholarship or fellowship grant that was not reported to you on a Form W-2 is not considered earned income for the earned income credit. 1040x example Inmate's income. 1040x example   Amounts received for work performed while an inmate in a penal institution are not earned income for the earned income credit. 1040x example This includes amounts received for work performed while in a work release program or while in a halfway house. 1040x example If you received any amount for work done while an inmate in a penal institution and that amount is included in the total on line 7 (Form 1040 or Form 1040A) or line 1 (Form 1040EZ), put “PRI” and the amount on the dotted line next to line 7 (Form 1040), in the space to the left of the entry space for line 7 (Form 1040A), or in the space to the left of line 1 (Form 1040EZ). 1040x example Pension or annuity from deferred compensation plans. 1040x example   A pension or annuity from a nonqualified deferred compensation plan or a nongovernmental section 457 plan is not considered earned income for the earned income credit. 1040x example If you received such an amount and it was included in the total on line 7 (Form 1040 or Form 1040A) or line 1 (Form 1040EZ), put “DFC” and the amount on the dotted line next to line 7 (Form 1040), in the space to the left of the entry space for line 7 (Form 1040A), or in the space to the left of line 1 (Form 1040EZ). 1040x example This amount may be reported in box 11 of your Form W-2. 1040x example If you received such an amount but box 11 is blank, contact your employer for the amount received as a pension or annuity. 1040x example Clergy. 1040x example   If you are a member of the clergy who files Schedule SE and the amount on line 2 of that schedule includes an amount that was also reported on line 7 (Form 1040), subtract that amount from the amount on line 7 (Form 1040) and enter the result in the first space of the worksheet in Step 5 of the Form 1040 instructions for lines 64a and 64b. 1040x example Put “Clergy” on the dotted line next to line 64a (Form 1040). 1040x example Church employees. 1040x example    A church employee means an employee (other than a minister or member of a religious order) of a church or qualified church-controlled organization that is exempt from employer social security and Medicare taxes. 1040x example If you received wages as a

The 1040x Example

1040x example 7. 1040x example   Figuring Gross Profit Table of Contents Introduction Items To Check Testing Gross Profit AccuracyExample. 1040x example Additions to Gross Profit Introduction After you have figured the gross receipts from your business (chapter 5) and the cost of goods sold (chapter 6), you are ready to figure your gross profit. 1040x example You must determine gross profit before you can deduct any business expenses. 1040x example These expenses are discussed in chapter 8. 1040x example If you are filing Schedule C-EZ, your gross profit is your gross receipts plus certain other amounts, explained later under Additions to Gross Profit. 1040x example Businesses that sell products. 1040x example   If you are filing Schedule C, figure your gross profit by first figuring your net receipts. 1040x example Figure net receipts (line 3) on Schedule C by subtracting any returns and allowances (line 2) from gross receipts (line 1). 1040x example Returns and allowances include cash or credit refunds you make to customers, rebates, and other allowances off the actual sales price. 1040x example   Next, subtract the cost of goods sold (line 4) from net receipts (line 3). 1040x example The result is the gross profit from your business. 1040x example Businesses that sell services. 1040x example   You do not have to figure the cost of goods sold if the sale of merchandise is not an income-producing factor for your business. 1040x example Your gross profit is the same as your net receipts (gross receipts minus any refunds, rebates, or other allowances). 1040x example Most professions and businesses that sell services rather than products can figure gross profit directly from net receipts in this way. 1040x example Illustration. 1040x example   This illustration of the gross profit section of the income statement of a retail business shows how gross profit is figured. 1040x example Income Statement Year Ended December 31, 2013 Gross receipts $400,000 Minus: Returns and allowances 14,940 Net receipts $385,060 Minus: Cost of goods sold 288,140 Gross profit $96,920   The cost of goods sold for this business is figured as follows: Inventory at beginning of year $37,845 Plus: Purchases $285,900   Minus: Items withdrawn for personal use 2,650 283,250 Goods available for sale $321,095 Minus: Inventory at end of year 32,955 Cost of goods sold $288,140 Items To Check Consider the following items before figuring your gross profit. 1040x example Gross receipts. 1040x example   At the end of each business day, make sure your records balance with your actual cash and credit receipts for the day. 1040x example You may find it helpful to use cash registers to keep track of receipts. 1040x example You should also use a proper invoicing system and keep a separate bank account for your business. 1040x example Sales tax collected. 1040x example   Check to make sure your records show the correct sales tax collected. 1040x example   If you collect state and local sales taxes imposed on you as the seller of goods or services from the buyer, you must include the amount collected in gross receipts. 1040x example   If you are required to collect state and local taxes imposed on the buyer and turn them over to state or local governments, you generally do not include these amounts in income. 1040x example Inventory at beginning of year. 1040x example   Compare this figure with last year's ending inventory. 1040x example The two amounts should usually be the same. 1040x example Purchases. 1040x example   If you take any inventory items for your personal use (use them yourself, provide them to your family, or give them as personal gifts, etc. 1040x example ) be sure to remove them from the cost of goods sold. 1040x example For details on how to adjust cost of goods sold, see Merchandise withdrawn from sale in chapter 6. 1040x example Inventory at end of year. 1040x example   Check to make sure your procedures for taking inventory are adequate. 1040x example These procedures should ensure all items have been included in inventory and proper pricing techniques have been used. 1040x example   Use inventory forms and adding machine tapes as the only evidence for your inventory. 1040x example Inventory forms are available at office supply stores. 1040x example These forms have columns for recording the description, quantity, unit price, and value of each inventory item. 1040x example Each page has space to record who made the physical count, who priced the items, who made the extensions, and who proofread the calculations. 1040x example These forms will help satisfy you that the total inventory is accurate. 1040x example They will also provide you with a permanent record to support its validity. 1040x example   Inventories are discussed in chapter 2. 1040x example Testing Gross Profit Accuracy If you are in a retail or wholesale business, you can check the accuracy of your gross profit figure. 1040x example First, divide gross profit by net receipts. 1040x example The resulting percentage measures the average spread between the merchandise cost of goods sold and the selling price. 1040x example Next, compare this percentage to your markup policy. 1040x example Little or no difference between these two percentages shows that your gross profit figure is accurate. 1040x example A large difference between these percentages may show that you did not accurately figure sales, purchases, inventory, or other items of cost. 1040x example You should determine the reason for the difference. 1040x example Example. 1040x example   Joe Able operates a retail business. 1040x example On the average, he marks up his merchandise so that he will realize a gross profit of 331/3% on its sales. 1040x example The net receipts (gross receipts minus returns and allowances) shown on his income statement is $300,000. 1040x example His cost of goods sold is $200,000. 1040x example This results in a gross profit of $100,000 ($300,000 − $200,000). 1040x example To test the accuracy of this year's results, Joe divides gross profit ($100,000) by net receipts ($300,000). 1040x example The resulting 331/3% confirms his markup percentage of 331/3%. 1040x example Additions to Gross Profit If your business has income from a source other than its regular business operations, enter the income on line 6 of Schedule C and add it to gross profit. 1040x example The result is gross business income. 1040x example If you use Schedule C-EZ, include the income on line 1 of the schedule. 1040x example Some examples include income from an interest-bearing checking account, income from scrap sales, income from certain fuel tax credits and refunds, and amounts recovered from bad debts. 1040x example Prev  Up  Next   Home   More Online Publications