Better late than never…
While doing research for eligible deductions on my taxes (always seek out a professional tax preparer or an accountant), I came across some interesting information about who can claim the Earned Income Credit (EIC) and dependents:
Homeless shelter. Your home can be any location where you regularly live. You don’t need a traditional home. 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.
Military personnel stationed outside the United States. U.S. 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. Extended active duty. Extended active duty means you are called or ordered to duty for an indefinite period or for a period of more than 90 days. Once you begin serving your extended active duty, you are still considered to have been on extended active duty even if you don’t serve more than 90 days.
Birth or death of child. A child who was born or died in 2015 is treated as having lived with you for more than half of 2015 if your home was the child’s home for more than half the time he or she was alive in 2015.
Temporary absences. 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. Examples of a special circumstance include illness, school attendance, business, vacation, military service, and detention in a juvenile facility.
Kidnapped child. 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. The child must be presumed by law enforcement authorities to have been kidnapped by someone who isn’t a member of your family or the child’s family. This treatment applies for all years until the child is returned. However, the last year this treatment can apply is the earlier of: 1. The year there is a determination that the child is dead, or 2. The year the child would have reached age 18. If your qualifying child has been kidnapped and meets these requirements, enter “KC,” instead of a number, on line 6 of Schedule EIC.
The Kidnapped Child exception, really struck a nerve with me. Unbelievable that such an exception would be needed. However, I thought it was important enough to note and share.
I’m sure many of you have already filed your taxes; however, for the few procrastinators out there with questions, this should help clear up some of the confusion.
Rules If You Have a Qualifying Child
If you have met all the rules in chapter 1, use this chapter to see if you have a qualifying child. This chapter discusses Rules 8 through 10. You must meet all three of those rules, in addition to the rules in chapters 1 and 4, to qualify for the earned income credit with a qualifying child.
You must file Form 1040 or Form 1040A to claim the EIC with a qualifying child. (You cannot file Form 1040EZ.) You also must complete Schedule EIC and attach it to your return. If you meet all the rules in chapter 1 and this chapter, read chapter 4 to find out what to do next. No qualifying child. If you don’t meet Rule 8, you don’t have a qualifying child. Read chapter 3 to find out if you can get the earned income credit without a qualifying child.
Rule 8—Your Child Must Meet the Relationship, Age, Residency, and Joint Return Tests Your child is a qualifying child if your child meets four tests. The four tests are: 1. Relationship, 2. Age, 3. Residency, and 4. Joint return.
Figure A. Tests for Qualifying Child AND OR Son, daughter, stepchild, foster child, or a descendant of any of them (for example, your grandchild) Brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant of any of them (for example, your niece or nephew) A qualifying child is a child who is your and younger than you (or your spouse, if filing jointly) Under age 24 at the end of 2015, a student, and younger than you (or your spouse, if filing jointly) was . . . Permanently and totally disabled at any time during the year, regardless of age Joint Return Who is not ling a joint return for 2015 (or is filing a joint return for 2015 only to claim a refund of income tax withheld or estimated tax paid) Who lived with you in the United States for more than half of 2015. Relationship Residency Age You can’t claim the EIC for a child who didn’t live with you for more than half of the year, even if you paid most of the child’s living expenses. The IRS may ask you for documents to show you lived with each qualifying child. Documents you might want to keep for this purpose include school and child care records and other records that show your child’s address. ! CAUTION If the child didn’t live with you for more than half of the year because of a temporary absence, birth, death, or kidnapping, see Temporary absences, Birth or death of child, or Kidnapped child in this chapter. TIP Caution: Figure A is an overview of the tests to claim a qualifying child. For details, see the rest of this chapter.
Page 10 Chapter 2
Rules If You Have a Qualifying Child Page 11 of 37 The 5 calendar months need not be consecutive. 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. School defined. A school can be an elementary school, junior or senior high school, college, university, or technical, trade, or mechanical school. However, on-the-job training courses, correspondence schools, and schools offering courses only through the Internet don’t count as schools for the EIC.
Vocational high school students. 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.
Permanently and totally disabled. Your child is permanently and totally disabled if both of the following apply. 1. He or she cannot engage in any substantial gainful activity because of a physical or mental condition. 2. A doctor determines the condition has lasted or can be expected to last continuously for at least a year or can lead to death.
Substantial gainful activity. Substantial gainful activity means performing significant duties over a reasonable period of time while working for pay or profit, or in work generally done for pay or profit. Full-time work (or part-time work done at an employer’s convenience) in a competitive work situation for at least the minimum wage shows that the child can engage in substantial gainful activity. Substantial gainful activity isn’t work done to take care of yourself or your home. It isn’t unpaid work on hobbies, institutional therapy or training, school attendance, clubs, social programs, and similar activities. However, doing this kind of work may show that the child is able to engage in substantial gainful activity. The fact that the child has not worked for some time doesn’t, by itself, prove the child cannot engage in substantial gainful activity. For examples of substantial gainful activity, see Pub. 524.
Residency Test Your child must have lived with you in the United States for more than half of 2015. You can’t claim the EIC for a child who didn’t live with you for more than half of the year, even if you paid most of the child’s living expenses. The IRS may ask you for documents to show you lived with each qualifying child. Documents you might want to keep for this purpose include school and child care records and other records that show your child’s address. *Note- CAUTION ! United States. This means the 50 states and the District of Columbia. It doesn’t include Puerto Rico or U.S. possessions such as Guam.
That’s all for now…
Happy tax season.