Nontaxable
combat pay election. You
can now elect to have your
nontaxable combat pay included
in earned income for the earned
income credit. For details, see
Rule
7 and
Rule
15.
Earned income
amount is more. The amount
you can earn and still get the
credit has increased for 2004.
The amount of income you earn
must be less than:
$30,338 ($31,338 for
married filing jointly)
with one qualifying
child,
$34,458 ($35,458 for
married filing jointly)
with more than one
qualifying child, or
$11,490 ($12,490 for
married filing jointly)
if you do not have a
qualifying child.
Investment
income amount is more. The
maximum amount of investment
income you can have and still
get the credit has increased to
$2,650. See
Rule 6.
Form 8836. If
you received Form 8836,
Qualifying Children Residency
Statement, you have been
selected to participate in the
EIC certification pilot program.
File the form with the IRS,
following the form instructions,
to show that your child met the
residency test described in
Rule
8. If you did not
receive the form, you do not
need to get it or file it. You
have to file Form 8836 only if
it was mailed to you.
Reminders
Increased EIC
on certain joint returns. A
married person filing a joint
return may get more EIC than
someone with the same income but
a different filing status. As a
result, the EIC table has
different columns for married
persons filing jointly than for
everyone else. 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.
Advance
payment of the earned income
credit in your paycheck. If
you expect to qualify for the
earned income credit in 2005,
you can receive part of it in
each paycheck throughout the
year. See Advance Earned Income
Credit, later, for
more information.
EIC
questioned by IRS. The IRS
may ask you to provide documents
to prove you are entitled to
claim the EIC. We will tell you
what documents to send us. These
may include: birth certificates,
school records, medical records,
etc. We will also send you a
letter with the name, address
and telephone number of the IRS
employee assigned to your case.
The process of establishing your
eligibility will delay your
refund.
Earned income
credit has no effect on certain
welfare benefits. Any refund
you receive because of the EIC
and any advance EIC payments you
receive generally will not be
considered income when
determining whether you are
eligible for the following
benefit programs, or how much
you can receive from these
programs.
Medicaid and
supplemental security
income (SSI).
Food stamps.
Low-income housing.
Temporary
assistance for needy families
(TANF) benefits may be affected.
Please check with your state.
Introduction
The earned income credit
(EIC) is a tax credit for
certain people who work and have
earned income under $35,458. A
tax credit usually means more
money in your pocket. It reduces
the amount of tax you owe. The
EIC may also give you a refund.
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.
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. Or, if
you prefer, you can let the IRS
figure the credit for you.
How will
this chapter help you?
This chapter will explain the
following:
The rules you must
meet to qualify for the
EIC,
How to figure the
EIC, and
How to get advance
payment of the EIC in
your paycheck.
Useful Items - You
may want to see:
Publication
596
Earned Income Credit
(EIC)
Form
(and Instructions)
Schedule EIC
Earned Income Credit
(Qualifying Child
Information)
W-5
Earned Income Credit
Advance Payment
Certificate
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. 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. There is one
final rule you must meet in Part
D,
Figuring and Claiming the EIC.
You qualify for the
credit if you meet all the rules
in each part that applies to
you.
If you have a
qualifying child, the
rules in
Parts A, B, and
D apply
to you.
If you do not have a
qualifying child, the
rules in
Parts A, C, and
D apply
to you.
Table 38-1,
Earned Income Credit in a
Nutshell. Use Table
38-1 as a guide to
Parts A, B, C,
and
D. The table is
a summary of all the rules
in each part.
Table 38-1. Earned
Income Credit in a
Nutshell
First,
you must
meet all the
rules in
this column.
Second,
you must
meet all the
rules in
one
of these
columns,
whichever
applies.
Third,
you must
meet the
rule in this
column.
Part A
Rules for
Everyone
Part B.
Rules If You
Have a
Qualifying
Child
Part C.
Rules If You
Do Not Have
a Qualifying
Child
Part D.
Figuring and
Claiming the
EIC
1.
Your
adjusted
gross income
(AGI) must
be less
than:
•$34,458
($35,458 for
married
filing
jointly) if
you have
more than
one
qualifying
child,
•$30,338
($31,338 for
married
filing
jointly) if
you have one
qualifying
child, or
•$11,490
($12,490 for
married
filing
jointly) if
you do not
have a
qualifying
child.
2.
You must
have a valid
social
security
number. 3.
Your filing
status
cannot be “Married
filing
separately.” 4.
You must be
a U.S.
citizen or
resident
alien all
year. 5.
You cannot
file Form
2555 or Form
2555-EZ
(relating to
foreign
earned
income). 6.
Your
investment
income must
be $2,650 or
less. 7.
You must
have earned
income.
8.
Your child
must meet
the
relationship,
age, and
residency
tests. 9.
Your
qualifying
child cannot
be used by
more than
one person
to claim the
EIC. 10.
You cannot
be a
qualifying
child of
another
person.
11.
You must be
at least age
25 but under
age 65. 12.
You cannot
be the
dependent of
another
person. 13.
You cannot
be a
qualifying
child of
another
person. 14.
You must
have lived
in the
United
States more
than half of
the year.
15.
Your earned
income must
be less
than:
•$34,458
($35,458 for
married
filing
jointly) if
you have
more than
one
qualifying
child,
•$30,338
($31,338 for
married
filing
jointly) if
you have one
qualifying
child, or
•$11,490
($12,490 for
married
filing
jointly) if
you do not
have a
qualifying
child.
Do you have
a qualifying child?
You have a qualifying
child only if you have a
child who meets the three
tests described in
Rule 8 and
illustrated in Figure 38-1.
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.
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. For example, if your
arithmetic is incorrect, the
IRS can correct it. If you
do not provide a correct
social security number, the
IRS can deny the EIC. These
kinds of errors are called
math or clerical errors.
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. If your error was due
to fraud, then you cannot
claim the EIC for the next
10 years.
More
information. See
chapter 5 in Publication
596 for more detailed
information about the
disallowance period and
Form 8862.
Part A. Rules for
Everyone
This part of the chapter
discusses Rules 1 through
7. You must meet all
seven rules to qualify for the
earned income credit. 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.
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.
Rule 1. Your
AGI Must Be Less
Than:
$34,458 ($35,458
for married filing
jointly) if you have
more than one
qualifying child,
$30,338 ($31,338
for married filing
jointly) if you have
one qualifying
child, or
$11,490 ($12,490
for married filing
jointly) if you do
not have a
qualifying child.
Adjusted gross income
(AGI). AGI is the
amount on line 37 (Form
1040), line 22 (Form
1040A), or line 4 (Form
1040EZ). If your AGI is
equal to or more than
the applicable limit
listed above, you cannot
claim the EIC.
Example.
Your AGI is $30,500,
you are single, and you
have one qualifying
child. You cannot claim
the EIC because your AGI
is not less than
$30,338. However, if
your filing status was
married filing jointly,
you might be able to
claim the EIC because
your AGI is less than
$31,338.
Community property.
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. This is
different from the
community property rules
that apply under
Rule 7.
Rule 2. 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). Any
qualifying child listed on
Schedule EIC also must have
a valid SSN. (See
Rule 8 if you
have a qualifying child.)
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. An example of a
federally funded benefit is
Medicaid.
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.S. citizen or
permanent resident, ask the
SSA for a new social
security card without the
legend.
U. S.
citizen. If you
were a U. S. citizen
when you received your
SSN, you have a valid
SSN.
Valid
for work only with INS
or DHS authorization.
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.
SSN
missing or incorrect.
If an SSN for you or
your spouse is missing
from your tax return or
is incorrect, you may
not get the EIC.
Other
taxpayer identification
number. 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). ITINs are issued
by the Internal Revenue
Service to noncitizens
who cannot get an SSN.
No SSN.
If you do not have a
valid SSN, put “No”
next to line 65a (Form
1040), line 41a (Form
1040A), or line 8a (Form
1040EZ). You cannot
claim the EIC.
Getting an SSN.
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
Social Security
Administration.
Filing deadline
approaching and still no
SSN. If the
filing deadline is
approaching and you
still do not have an
SSN, you have two
choices.
Request an
automatic
4-month
extension of
time to file
your return. You
can get this
extension by
filing Form
4868,
Application for
Automatic
Extension of
Time to File
U.S. Individual
Income Tax
Return. For more
information, see
chapter 1.
File the
return on time
without claiming
the EIC. After
receiving the
SSN, file an
amended return
(Form 1040X,
Amended U.S.
Individual
Income Tax
Return) claiming
the EIC. Attach
a filled-in
Schedule EIC if
you have a
qualifying
child.
Rule 3. Your
Filing Status
Cannot Be
Married Filing
Separately
If you are married, you
usually must file a joint
return to claim the EIC.
Your filing status cannot be
“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 chapter
2.
Rule 4. You
Must Be a U.S.
Citizen or
Resident Alien
All Year
You cannot claim the
earned income credit if you
are a nonresident alien for
any part of the year,
unless:
You are married
to a U.S. citizen or
a resident alien,
and
You choose to be
treated as a
resident for all of
2004 by filing a
joint return. If you
need more
information on
making this choice,
see Publication 519,
U.S. Tax Guide for
Aliens.
Note.
If you make the
choice in (2) above, you
and your spouse are
taxed on your worldwide
income. You cannot claim
any tax treaty benefits
as a resident of a
foreign country during a
tax year in which the
choice is in effect.
Rule 5. 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. You file
these forms to exclude
income earned in foreign
countries from your gross
income, or to deduct or
exclude a foreign housing
amount. U.S. possessions are
not foreign countries. See
Publication 54, Tax Guide
for U.S. Citizens and
Resident Aliens Abroad, for
more detailed information.
Rule 6. Your
Investment
Income Must Be
$2,650 or Less
You cannot claim the
earned income credit unless
your investment income is
$2,650 or less. If your
investment income is more
than $2,650, you cannot
claim the credit. For most
people, investment income is
the total of the following
amounts.
Taxable interest
(line 8a of Form
1040 or 1040A).
Tax-exempt
interest (line 8b of
Form 1040 or 1040A).
Dividend income
(line 9a of Form
1040 or 1040A).
Capital gain net
income (line 13 of
Form 1040, if more
than zero, or line
10 of Form 1040A).
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.
However, if you are
reporting income or loss
from the rental of personal
property on Form 1040, line
21, or are filing Schedule E
(Form 1040), Form 8814, or
Form 4797, see
Rule 6 in
chapter 1 of Publication 596
for more information.
Rule 7. You
Must Have Earned
Income
This credit is called the
earned income credit
because, to qualify, you
must work and have earned
income. If you are married
and file a joint return, you
meet this rule if at least
one spouse works and has
earned income. If you are an
employee, earned income
includes all the taxable
income you get from your
employer. 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.
Earned
Income
Earned income
includes all of the
following types of
income.
Wages,
salaries, tips,
and other
taxable employee
pay. Employee
pay is earned
income only if
it is taxable.
Nontaxable
employee pay,
such as certain
dependent care
benefits and
adoption
benefits, is not
earned income.
But there is an
exception for
nontaxable
combat pay,
which you can
choose to
include in
earned income,
as explained
below.
Net earnings
from
self-employment.
Gross income
received as a
statutory
employee.
Nontaxable combat
pay election.
You can elect to
have your nontaxable
combat pay included
in earned income for
the earned income
credit. Electing to
include nontaxable
combat pay in earned
income may increase
or decrease your
EIC. Figure the
credit with and
without your
nontaxable combat
pay before making
the election. If you
make the election,
you must include in
earned income all
nontaxable combat
pay you received.
See the instructions
for the form you are
using (Form 1040,
Form 1040A, or Form
1040EZ).
Wages, salaries, and
tips. Wages,
salaries, and tips
you receive for
working are reported
to you on Form W-2,
box 1. You should
report these on line
1 (Form 1040EZ) or
line 7 (Forms 1040A
and 1040).
Self-employed
persons and
statutory employees.
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.
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.
Each approved form
exempts certain income
from social security
taxes. Each form is
discussed in this
section in terms of what
is or is not earned
income for purposes of
the EIC.
Form 4361.
Even if you have
an approved Form
4361, amounts you
received for
performing
ministerial duties
as an employee count
as earned income.
This includes wages,
salaries, tips, and
other taxable
employee
compensation.
Amounts you received
for performing
ministerial duties,
but not as an
employee, do not
count as earned
income. Examples
include fees for
performing marriages
and honoraria for
delivering speeches.
Table
38-1. Earned
Income
Credit in a
Nutshell
First,
you
must
meet
all
the
rules
in
this
column.
Second,
you
must
meet
all
the
rules
in
one
of
these
columns,
whichever
applies.
Third,
you
must
meet
the
rule
in
this
column.
Part
A
Rules
for
Everyone
Part
B.
Rules
If
You
Have
a
Qualifying
Child
Part
C.
Rules
If
You
Do
Not
Have
a
Qualifying
Child
Part
D.
Figuring
and
Claiming
the
EIC
1.
Your
adjusted
gross
income
(AGI)
must
be
less
than:
•$34,458
($35,458
for
married
filing
jointly)
if
you
have
more
than
one
qualifying
child,
•$30,338
($31,338
for
married
filing
jointly)
if
you
have
one
qualifying
child,
or
•$11,490
($12,490
for
married
filing
jointly)
if
you
do
not
have
a
qualifying
child.
2.
You
must
have
a
valid
social
security
number.
3.
Your
filing
status
cannot
be “Married
filing
separately.”
4.
You
must
be a
U.S.
citizen
or
resident
alien
all
year.
5.
You
cannot
file
Form
2555
or
Form
2555-EZ
(relating
to
foreign
earned
income).
6.
Your
investment
income
must
be
$2,650
or
less.
7.
You
must
have
earned
income.
8.
Your
child
must
meet
the
relationship,
age,
and
residency
tests.
9.
Your
qualifying
child
cannot
be
used
by
more
than
one
person
to
claim
the
EIC.
10.
You
cannot
be a
qualifying
child
of
another
person.
11.
You
must
be
at
least
age
25
but
under
age
65.
12.
You
cannot
be
the
dependent
of
another
person.
13.
You
cannot
be a
qualifying
child
of
another
person.
14.
You
must
have
lived
in
the
United
States
more
than
half
of
the
year.
15.
Your
earned
income
must
be
less
than:
•$34,458
($35,458
for
married
filing
jointly)
if
you
have
more
than
one
qualifying
child,
•$30,338
($31,338
for
married
filing
jointly)
if
you
have
one
qualifying
child,
or
•$11,490
($12,490
for
married
filing
jointly)
if
you
do
not
have
a
qualifying
child.
Form 4029.
Even if you have
an approved Form
4029, all wages,
salaries, tips, and
other taxable
employee
compensation count
as earned income.
However, amounts you
received as a
self-employed
individual do not
count as earned
income. Also, in
figuring earned
income, do not
subtract losses on
Schedule C, C-EZ, or
F from wages on line
7 of Form 1040.
Disability
Benefits
If you retired on
disability, benefits you
receive under your
employer's disability
retirement plan are
considered earned income
until you reach minimum
retirement age. Minimum
retirement age generally
is the earliest age at
which you could have
received a pension or
annuity if you were not
disabled. You must
report your taxable
disability payments on
line 7 of either Form
1040 or Form 1040A until
you reach minimum
retirement age.
Beginning on the day
after you reach minimum
retirement age, payments
you receive are taxable
as a pension and are not
considered earned
income. Report taxable
pension payments on Form
1040, lines 16a and 16b
(or Form 1040A, lines
12a and 12b).
Disability insurance
payments.
Payments you
received from a
disability insurance
policy that you paid
the premiums for are
not earned income.
It does not matter
whether you have
reached minimum
retirement age. If
this policy is
through your
employer, the amount
may be shown in box
12 of your Form W-2
with code “J.”
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.
Do not include any of
these items in your
earned income.
Earnings while an
inmate.
Amounts received
for work performed
while an inmate in a
penal institution
are not earned
income when figuring
the earned income
credit. This
includesamounts for
work performed while
in a work release
program or while in
a halfway house.
Workfare payments.
Nontaxable
workfare payments
are not earned
income for the EIC.
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
sufficient private
sector employment is
not available, or
(2) community
service program
activities.
Community property.
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. That amount is
not earned income
for the EIC, even
though you must
include it in your
gross income on your
income tax return.
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.
Nontaxable military
pay.
Nontaxable pay for
members of the Armed
Forces is not
considered earned
income for the
earned income
credit. Examples of
nontaxable military
pay are combat pay.
the Basic Allowance
for Housing (BAH),
and the Basic
Allowance for
Subsistence (BAS).
See Publication 3,
Armed Forces' Tax
Guide, for more
information.
Combat pay. You can elect
to have your
nontaxable combat
pay considered
earned income for
the EIC. See
Nontaxable combat
pay election ,
earlier.
Part B. 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.
Part B discusses
Rules
8 through
10. 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.
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
Part
A and this part,
read
Part D to find out
what to do next.
If you do not meet Rule 8
, you do not have a qualifying
child. Read Part C to find out
if you can get the earned income
credit without a qualifying
child.
Rule 8. Your
Child Must Meet
the
Relationship,
Age, and
Residency Tests
Your child is a
qualifying child if your
child meets three tests. The
three tests are:
Relationship,
Age, and
Residency.
The three tests are
illustrated in Figure 38-1.
The paragraphs that follow
contain more information
about each test.
Relationship
Test
To be your qualifying
child, a child must be
your:
Son,
daughter,
adopted child,
stepchild, or a
descendant (for
example, your
grandchild) of
any of them, or
Brother,
sister,
stepbrother,
stepsister, or a
descendant (for
example, your
niece or nephew)
of any of them
whom you cared
for as you would
your own child,
or
Eligible
foster child.
The following
definitions clarify the
relationship test.
Adopted child.
An adopted child
is always treated as
your own child. Your
adopted child
includes a child
placed with you for
adoption by an
authorized placement
agency, even if the
adoption is not
final.
An authorized
placement agency
includes any person
or court authorized
by state law to
place children for
legal adoption.
Child not a
dependent.
Your child does
not have to be your
dependent to be a
qualifying child,
unless he or she is
married.
Married child.
If your child was
married at the end
of the year, he or
she does not meet
the relationship
test unless either
of these two
situations applies
to you:
You can
claim the
child's
exemption,
or
The
reason you
cannot claim
the child's
exemption is
that you
gave that
right to
your child's
other
parent:
When
you
completed
Form
8332
or a
similar
written
statement,
or
In a
pre-1985
agreement
(such
as a
separation
agreement
or
divorce
decree).
Eligible foster
child.
For the EIC, a
person is your
eligible foster
child if both of the
following are true.
The
child is
placed with
you by an
authorized
placement
agency. An
authorized
placement
agency
includes a
state or
local
government
agency or
court. It
also
includes a
tax-exempt
organization
licensed by
a state. In
addition, it
includes an
Indian
tribal
government
or an
organization
authorized
by an Indian
tribal
government
to place
Indian
children.
You
cared for
that child
as you would
your own
child.
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.
You care for her
as you would
your own child.
Debbie is your
eligible foster
child.
Age Test
Your child must be:
Under age 19
at the end of
2004,
A full-time
student under
age 24 at the
end of 2004, or
Permanently
and totally
disabled at any
time during
2004, regardless
of age.
The following example
and definitions clarify
the age test.
Example.
Your son turned
19 on December 10.
Unless he was
disabled or a
full-time student,
he is not a
qualifying child
because, at the end
of the year, he was
not under age 19.
Full-time student.
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.
Student defined.
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
regularly
enrolled
student
body, 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.
The 5 calendar
months need not be
consecutive.
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 night
schools do not count
as schools for the
EIC. (But see
Night school,
later.)
Vocational high
school students.
Students who work
on 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.
Night school.
Your child is not
a full-time student
if he or she attends
school only at
night. However,
full-time attendance
at a school may
include some
attendance at night
as part of a
full-time course of
study.
Permanently and
totally disabled.
Your child is
permanently and
totally disabled if
both of the
following apply.
He or
she cannot
engage in
any
substantial
gainful
activity
because of a
physical or
mental
condition.
A doctor
determines
the
condition
has lasted
or can be
expected to
last
continuously
for at least
a year or
can lead to
death.
Residency
Test
Your child must have
lived with you in the
United States for more
than half of 2004. The
following definitions
clarify the residency
test.
United States.
This means the 50
states and the
District of
Columbia. It does
not include U.S.
possessions, such as
Guam and Puerto
Rico.
Homeless shelter.
Your home can be
any location where
you regularly live.
You do not 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 do not serve
more than 90 days.
Birth or death of a
child. A child
who was born or died
in 2004 is treated
as having lived with
you for all of 2004
if your home was the
child's home the
entire time he or
she was alive in
2004.
Temporary absences.
Count time that
you or your child is
away from home on a
temporary absence
due to a special
circumstance as time
lived at home.
Examples of a
special circumstance
include:
Illness,
School
attendance,
Detention in
a juvenile
facility,
Business,
Vacation,
and
Military
service.
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 is not a
member of your
family or your
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:
The year
there is a
determination
that the
child is
dead, or
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.
Social security
number.
Your qualifying
child must have a
valid social
security number
(SSN) unless the
child was born and
died in 2004. You
cannot claim the EIC
on the basis of a
qualifying child if:
Your
qualifying
child's SSN
is missing
from your
tax return
or is
incorrect,
Your
qualifying
child's
social
security
card says “Not
valid for
employment”
and was
issued only
for use in
getting a
federally
funded
benefit, or
Instead
of an SSN,
your
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.
If you have two
qualifying children
and only one has a
valid SSN, you can
claim the EIC only
on the basis of that
child. For more
information about
SSNs, see
Rule 2.
Rule 9. Your
Qualifying Child
Cannot Be Used
By More Than One
Person To Claim
the EIC
Sometimes a child meets
the rules to be a qualifying
child of more than one
person. However, only one
person can treat that child
as a qualifying child and
claim the EIC using that
child. The paragraphs that
follow will help you decide
who can claim the EIC when
more than one person has the
same qualifying child.
You can
choose which person will
claim the EIC. If
you and someone else
have the same qualifying
child, you and the other
person(s) can decide who
will claim the credit
using that qualifying
child. But if you and
the other person(s)
cannot agree and more
than one person claims
the credit using the
same child, the
tie-breaker rule
(explained in Table
38-2, on the next page)
applies. If the other
person is your spouse
and you file a joint
return, this rule does
not apply.
If
another person claims
the EIC using this
child. If your EIC
is denied because your
qualifying child is
treated under this rule
as the qualifying child
of another person for
2004, you may be able to
take the EIC using a
different qualifying
child, but you cannot
take the EIC for people
who do not have a
qualifying child. If you
do not have another
qualifying child, you
cannot take the EIC. Put
“No”
beside line 65a (Form
1040) or line 41a (Form
1040A).
If the
other person cannot
claim the EIC. 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 can
treat the child as a
qualifying child. See
Example 4
below.
Example 1 – child lived
with parent and
grandparent.
You and your
2-year-old son lived
with your mother all
year. You are 25 years
old. Your only income
was $9,000 from a
part-time job. Your
mother's only income was
$20,000 from her job.
Your son is a qualifying
child of both you and
your mother because he
meets the relationship,
age, and residency tests
for both you and your
mother. However, only
one of you can use him
to claim the EIC. You
and your mother may
choose which of you will
treat the child as a
qualifying child to
claim the EIC. However,
if you and she disagree
and both use him to
claim the EIC, you as
the child's parent will
be the only one allowed
to claim the credit
using this child.
Example 2 – three
children lived with
parent and grandparent.
The facts are the
same as in
Example 1,
except that you also
have two other young
children who lived with
you and your mother and
are qualifying children
of both you and your
mother. Only one of you
can use each child to
claim the EIC. However,
you and your mother can
split the three
qualifying children
between you. For
example, you can use one
child to claim the EIC
and your mother can use
the other two.
Example 3 – parent is
qualifying child of
grandparent.
The facts are the
same as in
Example 1,
except that you are only
18 years old. This means
you are a qualifying
child of your mother.
Because of
Rule 10,
you cannot claim the
EIC. Only your mother
may be able to treat
your son as a qualifying
child to claim the EIC.
Example 4 – parent can
claim EIC because
grandparent cannot.
The facts are the
same as in
Example 1,
except that your mother
earned $50,000 from her
job. Because your
mother's earned income
is too high for her to
claim the EIC, only you
can claim the EIC using
your son.
Example 5 – divorced
parents.
You, your husband,
and your 10-year-old son
lived together until
July 1, 2004, when your
husband moved out of the
household. In July and
August, your son lived
with your husband. In
September and October,
the boy lived with you.
On November 1, 2004, you
and your husband were
divorced. For the rest
of the year, your son
lived with your
ex-husband, who was
given custody. Your son
is a qualifying child of
both you and your
ex-husband because your
son lived with each of
you for more than half
the year and because he
met the relationship and
age tests for both of
you.
You and your
ex-husband may choose
which of you will treat
the child as a
qualifying child to
claim the EIC. However,
if you and he are unable
to agree and both use
the child to claim the
EIC, only your
ex-husband will be
allowed to claim the
credit using this child.
This is because, during
2004, the child lived
with him longer than
with you. You cannot
claim the EIC for
persons either with or
without a qualifying
child.
Example 6 – unmarried
parents.
You, your 5-year-old
son, and your son's
father lived together
all year. You and your
son's father are not
married. Your son is a
qualifying child of both
you and his father
because he meets the
relationship, age, and
residency tests for both
you and his father. You
earned $8,000 and your
son's father earned
$18,000. Neither of you
had any other income.
You and your son's
father may choose which
of you will treat the
child as a qualifying
child to claim the EIC.
However, if you and he
are unable to agree and
both use the child to
claim the EIC, only the
father will be allowed
to claim the credit
using this child. This
is because his AGI
($18,000) was more than
your AGI ($8,000). You
cannot claim the EIC for
persons either with or
without a qualifying
child.
Example 7 – child did
not live with a parent.
You and your
7-year-old niece lived
with your mother all
year. You care for your
niece as you would your
own child. You are 25
years old, and your only
income was $9,300 from a
part-time job. Your
mother's only income was
$15,000 from her job.
Your niece is a
qualifying child of both
you and your mother
because she meets the
relationship, age, and
residency tests for both
you and your mother.
However, only one of you
can treat her as a
qualifying child to
claim the EIC. You and
your mother may choose
which of you will use
the child to claim the
EIC. However, if you and
she are unable to agree
and both use the child
to claim the EIC, only
your mother will be
allowed to claim the
credit using this child.
This is because her AGI
($15,000) is higher than
your AGI ($9,300).
Table 38-2.
When More
Than One
Person
Claims EIC
Using Same
Child
(Tie-Breaker
Rule)
IF more
than one
person
claims the
EIC using
the same
child and .
. .
THEN . .
.
Only one of
the persons
is the
child's
parent
Only the
parent can
treat the
child as a
qualifying
child.
Two of the
persons are
the child's
parent, and
they do not
file a joint
return
together
Only the
parent with
whom the
child lived
the longest
during the
year can
treat the
child as a
qualifying
child.
Two of the
persons are
the child's
parent, the
child lived
with each
parent the
same amount
of time
during the
year, and
the parents
do not file
a joint
return
together
Only the
parent with
the highest
adjusted
gross income
(AGI) can
treat the
child as a
qualifying
child.
None of the
persons are
the child's
parent
Only the
person with
the highest
AGI can
treat the
child as a
qualifying
child.
Rule 10. You
Cannot Be a
Qualifying Child
of Another
Person
You are a qualifying
child of another person
(your parent, guardian,
foster parent, etc.) if all
of the following statements
are true.
You are that
person's son,
daughter, adopted
child, stepchild,
grandchild, or
eligible foster
child. Or, you are
that person's
brother, sister,
stepbrother, or
stepsister (or the
child or grandchild
of that person's
brother, sister,
stepbrother, or
stepsister) and that
person cares for you
as his or her own
child.
At the end of
the year you were
under age 19, or
under age 24 and a
full-time student,
or any age if you
were permanently and
totally disabled at
any time during the
year.
You lived with
that person in the
United States for
more than half of
the year.
For more details about
the tests to be a qualifying
child, see
Rule 8.
If you (or your spouse if
filing a joint return) are a
qualifying child of another
person, you cannot claim the
EIC. 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.
Put “No”
beside line 65a (Form 1040)
or line 41a (Form 1040A).
Example.
You and your daughter
lived with your mother
all year. You are 22
years old and attended a
trade school full time.
You had a part-time job
and earned $5,700. You
had no other income.
Because you meet the
relationship, age, and
residency tests, you are
a qualifying child of
your mother. She can
claim the EIC if she
meets all the other
requirements. Because
you are your mother's
qualifying child, you
cannot claim the EIC.
This is so even if your
mother cannot or does
not claim the EIC.
Part C. 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.
Part
C discusses
Rules
11 through
14. 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.
If you have a qualifying
child, the rules in this part do
not apply to you. You can claim
the credit only if you meet all
the rules in Parts A, B, and D.
See Rule 8 to find out if you
have a qualifying child.
Rule 11. 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 2004. 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 2004. It does not
matter which spouse meets
the age test, as long as one
of the spouses does.
If neither you nor your
spouse meets the age test,
you cannot claim the EIC.
Put “No”
next to line 65a (Form
1040), line 41a (Form
1040A), or line 8a (Form
1040EZ).
Example 1.
You are age 28 and
unmarried. You meet the
age test.
Example 2.
You are married and
filing a joint return.
You are age 23 and your
spouse is age 27. You
meet the age test
because your spouse is
at least age 25 but
under age 65.
Rule 12. 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 checked the
“No”
box on line 5 of
Form 1040EZ.
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 checked the “No”
box on line 5 of
Form 1040EZ.
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.
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.
Example 1.
In 2004, you were age
25, single, and living
at home with your
parents. You worked and
were not a student. You
earned $7,500. Your
parents cannot claim you
as a dependent. When you
file your return, you
claim an exemption for
yourself by checking the
“No”
box on line 5 of your
Form 1040EZ. You meet
this rule.
Example 2.
The facts are the
same as in
Example 1, except that you
earned $2,000. Your
parents can claim you as
a dependent but decide
not to. You do not meet
this rule. You cannot
claim the credit because
your parents could have
claimed you as a
dependent.
Rule 13. You
Cannot Be a
Qualifying Child
of Another
Person
You are a qualifying
child of another person
(your parent, guardian,
foster parent, etc.) if all
of the following statements
are true.
You are that
person's son,
daughter, adopted
child, stepchild,
grandchild, or
eligible foster
child. Or, you are
that person's
brother, sister,
stepbrother, or
stepsister (or the
child or grandchild
of that person's
brother, sister,
stepbrother, or
stepsister) for whom
that person cares as
his or her own
child.
At the end of
the year you were
under age 19, or
under age 24 and a
full-time student,
or any age if you
were permanen
