Last Updated : January 14, 2009
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EICWkt

EIC Worksheet

(Earned Income Credit)

The earned income credit, or EIC, is a refundable credit for workers who meet certain requirements and file a tax return. Persons with or without a qualifying child may claim the EIC. The maximum credit taxpayer can get will depend on whether the person has no qualifying children, one qualifying child, or more than one qualifying child. Additionally, the maximum credit possible can change each year due to inflationary adjustments.

Qualifying Child Information:
The information on this worksheet comes from Main info sheet. When you enter the name of the child, SSN, Year of birth and other information on main info sheet, and check the checkbox for claiming EIC, the program will transfer the information of child here.

EIC Eligibility and Calculation Worksheet:
You must fill up EIC Worksheet to check whether taxpayer is eligible for Earned Income Credit or not. Most of the entries in this worksheet is calculated, program automatically calculates the EIC on the basis of the information entered in return.

EIC Eligibility Rules:

Adjusted Gross Income:
Taxpayer’s AGI must be less than
$36,348 ($38,348 for married filing jointly) if have more than one qualifying child,
$32,001 ($34,001 for married filing jointly) if have one qualifying child, or
$12,120 ($14,120 for married filing jointly) if do not have a qualifying child.

AGI is the amount on line 4 of Form 1040EZ, line 22 of Form 1040A, or line 38 of Form 1400. If taxpayer’s AGI is equal to or more than the applicable limit listed above, taxpayer cannot claim the EIC.

Earned Income:
This credit is called the “earned income” credit because, to qualify, taxpayer must work and have earned income. If taxpayer is married and filed a joint return, then taxpayer meets this rule if at least one spouse works and has earned income. If taxpayer is an employee, earned income includes all the taxable income he/she gets from employer.

The program transfers the amount of earned income form the line 5 of the worksheet given at the bottom of the EIC calculation worksheet.

Number of qualifying child:
The program will enter the number of qualifying child on the base of calculation made on Schedule EIC.

Part I – Rules for All Taxpayers:

Rule 1:
If you are married, you usually must file a joint return to claim the EIC. Your filing status cannot be “Married filing separately.” The program check the box “Yes” if in “General Information Worksheet” filing status is “Married filing separately.

Spouse did not live with you. 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. In that case, you may be able to claim the EIC. For detailed information about filing as head of household, see Publication 501, Exemptions, Standard Deduction, and Filing Information.

Rule 2:
You cannot claim the earned income credit if you file Form 2555, Foreign Earned Income, or Form 2555-EZ, Foreign Earned Income Exclusion. You file these forms to exclude income earned in foreign countries from your gross income, or to deduct or exclude a foreign housing amount.

The program will check the checkbox “Yes” if Form 2555 or 2555-EZ is active in the return.

Rule 3:
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. You can use that filing status only if one spouse is a U.S. citizen or resident alien and you choose to treat the nonresident spouse as a U.S. resident. If you make this choice, you and your spouse are taxed on your worldwide income. If you need more information on making this choice, get Publication 519, U.S. Tax Guide for Aliens.

Rule 4:
Program calculates the investment income and transfers it in this box. If it is more than $2800, then you are not eligible for EIC.

Rule 5:
For claiming EIC, taxpayer or spouse if filing a joint return, cannot be a qualifying child of another person in 2006. If taxpayer or spouse if filing a joint return, is qualifying child of another person then taxpayer is not eligible for claiming EIC, and not required to fill further worksheet.

Rule 6:
If taxpayer has at least one child who meets the conditions for qualifying child, then check box “Yes” and fill up part II. Otherwise check box “No” and go to part III.

Part II – Taxpayers with Qualifying Child:

Rule 7:
The program will check this checkbox on the basis of information you have entered on main info and other forms, if this checkbox “Yes” is checked then you can continue to fill up this form. If you do not fulfill conditions for AGI then stop here you cannot take EIC.

Rule 8:
The program will automatically check this checkbox “Yes” on the basis of information you have entered on main info sheet and earned income calculated at the bottom of this form. If this checkbox is checked then you can continue to fill up this form.

Rule 9-11:
Check the applicable boxes on rule 9 to rule 11.

Part III – Taxpayers without Qualifying Child:

Rule 12:
The program will check this checkbox “Yes” on the basis of information you have entered on main info and other forms, if this checkbox is checked then you can continue to fill up this form.

If you do not fulfill conditions for AGI then stop here you cannot take EIC.

Rule 13:
The program will automatically check this checkbox “Yes” on the basis of information you have entered on main info sheet and earned income calculated at the bottom of this form. If this checkbox is checked then you can continue to fill up this form.

Rule 14:
If you have checked the checkbox on main info sheet, then checkbox “Yes” will be checked and you are not eligible for EIC. If you are not sure whether someone else can claim you (or your spouse if filing joint return) as a dependent, the refer Publication 501, rules for claiming a dependent.

Rule 15:
You must be at least age 25 but under 65 at the end of 2006. If you are married filing jointly, either you or your spouse must be at least age 25 but under 65 at the end of 2006. It does not matter which spouse meets the age test. If neither you nor your spouse meets the age test, you cannot claim the EIC.

Rule 16:
For claiming EIC, your home (and your spouse's, if filing a joint return) must have been in the US for more than half the year. If you do not satisfy this rule, you are not eligible for EIC.

EIC Calculation Worksheet:

Line 1a:
The program will enter this amount from respective lines of form 1040, 1040A and 1040-EZ. For example, from row 1 and row 2 of line 1 of form 1040-EZ.

Line 1b:
Enter here any amount if applicable to taxpayer

Line 3:
The program will transfer the amount of nontaxable combat pay from form W-2 and W-2GU, box 12 if there is Code 'Q'.

Check the checkbox on line 3, if you want to add the amount of nontaxable combat pay in the calculation of EIC.

Line 4:
Amount on this line comes from Schedule SE, Part B line 3.

Line 6, 7, 8:
This amount will be calculated on the basis of the EIC Tax Table given in the instruction by the IRS.

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