If a return doesn't qualify for the Earned Income Credit, you can print a report under the View Results menu called "Why No EIC Calculated". This report includes a list of reasons why the taxpayer doesn't qualify for EIC, and depending on the information in the return multiple reasons may be indicated.
Among the different reasons, the one that is almost always checked is "EIC Checklist was not answered correctly". The checklist being referred to in this reason is the EIC Due Diligence Checklist. When this reason is given, it doesn't mean you the preparer made a mistake. What it means depends on whether or not other reasons are given:
- When it is the only reason indicated why EIC isn't being given, it means that one of the EIC qualifying questions was answered in a way that disqualifies the taxpayer from receiving EIC.
- When one or more other reasons are also indicated why EIC isn't being given, they are the primary reason and you can ignore the "EIC Checklist was not answered correctly" reason since there is no way to "correctly" answer the questions due to the taxpayer not otherwise qualifying for EIC.
Kinds of EIC Checklist questions
In the EIC Due Diligence Checklist there are two kinds of questions related to EIC:
- EIC Qualifying Questions - If the answer to this kind of question disqualifies the taxpayer for EIC, you will see "DOES NOT QUALIFY" in the EIC Due Diligence Checklist menu.
- Due Diligence Questions - If the answer to this kind of question indicates you haven't performed adequate due diligence, you will see "DOES NOT MEET" in the EIC Due Diligence Checklist menu. Inadequate preparer due diligence doesn't disqualify a taxpayer from receiving EIC, so if the taxpayer qualifies for EIC they will receive it. Seeing "DOES NOT MEET" tells you that you haven't met your due diligence obligation to the IRS.
EIC Checklist questions
Questions for all taxpayers
- Was the taxpayer a nonresident alien for any part of the year? - This is an EIC qualifying question. If this question is answered Yes, the taxpayer does not qualify for EIC and no EIC will calculate in the return.
- Have you determined that the taxpayer is, in fact, eligible to claim the EIC for the number of children for whom the EIC is claimed, or to claim EIC if the taxpayer has no qualifying child? - This is a due diligence question. If the taxpayer doesn't qualify for EIC due to their age, kinds or amounts of income, AGI, filing status, lack of a valid SSN, or other reason, then the answer to this question is or should be No, even if you answer Yes in the program.
Questions for a taxpayer with a qualifying child
- Did you explain to the taxpayer that he/she may not claim the EIC if the taxpayer has not lived with the child for over half the year, even if the taxpayer has supported the child? - This is a due diligence question.
- Did you explain to the taxpayer the rules about claiming EIC when a child is the qualifying child of more than one person (tie-breaker rules)? - This is a due diligence question.
- Does [the child] qualify another person for EIC? - This is an EIC qualifying question. If this question is answered Yes, and the child does not qualify as this taxpayer's qualifying child under the tie-breaker rules, the taxpayer does not qualify for EIC and no EIC will calculate in the return.
- Did you explain the tiebreaker rules and possible consequences of another person claiming your client's qualifying child? - This is a due diligence question and is only asked if a child qualifies another person for EIC but under the tie breaker rules qualifies your client for EIC.
Questions for a taxpayer without a qualifying child
- Was the taxpayer's main home (and the taxpayer's spouse if filing jointly) in the United States for more than half the year? - This is an EIC qualifying question, and if answered No the taxpayer does not qualify for EIC and no EIC will calculate in the return.
- Is the taxpayer (or the taxpayer's spouse if filing jointly) eligible to be claimed as a dependent on anyone else's federal income tax return for the tax year 20xx? - This is an EIC qualifying question, and if answered Yes the taxpayer does not qualify for EIC and no EIC will calculate in the return.
Additional Information