Many provisions of the Internal Revenue Code are complicated. Proper interpretation of the rules and regulations contained in these provisions requires the assistance of an experienced and knowledgeable tax professional. The fifth part of the series about the most confusing provisions of the Internal Revenue Code addresses earned income tax credits.
Why Is It Confusing?
- Complicated definitions and rules
- Multitudes of required calculations
In 2004, Congress made this credit for low-income taxpayers slightly less confusing by adopting a uniform definition of a qualifying child. But even the tests (relationship, age, residency, and joint return) to be a qualifying child under the EITC may be confusing and cumbersome for many taxpayers.
The EITC includes many complicated definitions and rules while requiring many, seemingly endless calculations. Such a tax with so many details especially creates a particular burden for the low- income taxpayers it was created to help.
*You qualify for EITC if:
- you have earned income and adjusted gross income within certain limits; AND
- you meet certain basic rules; AND
- you either:
- meet the rules for those without a qualifying child; OR
- have a child that meets all the qualifying child rules for you, or your spouse if you file a joint return.
*If you do not have a child that qualifies you for EITC, you are eligible for EITC if:
- You (and your spouse if you file a joint return) meet all the EITC basic rules AND
- You (and your spouse if you file a joint return) cannot be claimed as a dependent or qualifying child on anyone else’s return, AND
- You (or your spouse if you file a joint return) are between 25 and 65 years old at the end of the tax year, usually Dec. 31.
If your filing status is married filing separately, you are ineligible to claim EITC.
If this isn’t confusing enough, here’s an excerpt from the IRS website about claiming the EITC:
IMPORTANT: Only one person can claim the same child. If a child qualifies for more than one person and one of the persons is a parent or parents, the non-parent can claim the child only if their AGI is higher than the parent(s). If the child qualifies another relative and the parent AGI rules do not apply, the taxpayers choose. If more than one person claims the same child, IRS applies the tiebreaker rules.
It’s one thing to know the basic rules; it’s another to also know the “tiebreaker rules,” as the rules related to the Earned Income Tax Credit are complicated and confusing. As a result, properly claiming the EITC may require the assistance of an experienced and knowledgeable tax professional. If you have questions about any tax-related issue, call THE TAX EXPERTS at the Thorgood Law Firm www.thorgoodlaw.com. For a FREE consultation call 212-490-0704.
