Topic 13 - Earned Income Credit

This tax topic will teach you the rules and regulations regarding claiming the earned income credit. The earned income credit (EIC) is a tax credit for certain people who work and have earned income. A tax credit usually reduces the amount owed and may give you a refund even if you have had no money withheld or have made no estimated tax payments along the year.

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Use  IRS Publication 596 to complete this topic.

Complete a tax return for Abeque Morris.

Her Children who lived with her all year are:

    Son: James Gowdy.....(626-12-6525) DOB 4-17-1997

    Daughter: Nellie Gowdy....(688-54-5661) DOB 6-18-1995

Abeque was single and was the only person that supported her family in 2008.

she also received Interest income from her bank account  $390.

Complete  Form 1040A and Schedule EIC (Form 1040) using the following W2 information.

All information on W2 is current, including address information.

 

 

1. Look at the Form 1040A you prepared for Abeque Morris. What is the amount on Form 1040A, Line 40a?

A. $ 5,450.
B. $ 4,680.
C. $ -0-. 
D. $ 4,764.

2. Look at the Form 1040A you prepared for Abeque Morris. What is the amount on Form 1040A, Line 45a?

A. $ -0-.
B. $ 4,764.
C. $ 4,772. 
D. $ 4,688.

3. A married person filing a joint return may get more EIC than someone with the same income but a different filing status.                

True False

4. Any refund you receive because of the EIC and any advance EIC payments you receive will be considered income when determining whether you are eligible for the benefit programs.                         

True False

5. The IRS may ask you to provide documents to prove you are entitled to claim the earned income credit. The IRS will tell you what documents to send them. These documents may be

A. Birth certificates.
B. School records.
C. Medical records. 
D. Any of the above.

6. If you received advance payments of EIC in 2008, you must file Form 1040 or Form 1040A to report the payments. This amount will show on your

A. Form W-2, box 1.
B. Form W-2, box 9.
C. Form W-2, box 10.
 D. Form W-2, box 17.

7. Your AGI is $34,500, you are single, and you have one qualifying child. You cannot claim the EIC because your AGI is not less than

A. $ 33,995.
B. $ 34,500.
C. $ 33,241. 
D. $ 39,783.

8. You don't have a valid SSN if your Social Security card reads

A. "Valid for work only with INS authorization".
B. "Valid for work only with DHS authorization".
C. "Not valid for Employment".
 D. None of the above.

9. If you are married, you usually must file a joint return to claim the EIC. Your filing status cannot be

A. Single.
B. Married Filing Jointly.
C. Head of Household. 
D. Married Filing Separately.

10. If you are married and your spouse did not live in your home at any time during ________ 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.

A. The first 6 months of the year.
B. Any 6 months of the year.
C. The last six months of the year. 
D. The last month of the year.

11. 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

A. Single.
B. Married Filing Jointly.
C. Head of Household. 
D. Married Filing Separately.

12. You cannot claim the earned income credit if you file

A. Form 1040A or Form 1040EZ.
B. Form 2555 or Form 2555-EZ.
C. Form 540A or Form 540EZ. 
D. Form 2441 or Schedule 2.

13. Nontaxable pay for members of the Armed Forces is considered earned income for EIC.                        

True False

14. To qualify for the EIC as a student, your child must be, during some part of any 5 calendar months during the calendar year

A. A full-time student at a school that has a regular teaching staff, course of study, and regular student body at the school.
B. A student taking a full-time, on-farm training course given by a school that has a regular teaching staff, course of study, and regular student body.
 C. A student taking a full-time, on-farm training course given by a state, county, or local government. 
D. All of the above.

15. For the residency test, your home can be any location where you regularly live. The following is an example of a home.

A. Homeless shelter.
B. A van or a spot under a bridge.
C. A mobile home. 
D. Any of the above.

16. To claim the EIC, you must be at least age 25, but under age 65 at the end of 2008. If you are married and filing a joint return, you are age 22 and your spouse is age 33. You

A. Do not meet the age test because you are not age 25.
B. Meet the age test because your spouse is at least age 25, but not over 65.
C. Can only claim half of the EIC because only your spouse qualifies, since she is the only one that is over age 25. 
D. None of the above.

17. To qualify for the earned income credit with a qualifying child, you must meet which test?

A. Relationship test.
B. Age test.
C. Residency test. 
D. All of the above.

18. Having a qualifying child who lives with you in your home for more than 6 months meets what test?

A. Age test
B. Relationship test
C. Residency test
D. Gross income test

19. If your Earned Income Credit was denied, send Form 8862 if it was denied because

A. You loaned your dependents to your friend
B. You claimed a dependent that was not yours
C. You and your spouse each tried to claim the earned income credit
D. Any of the above

20. Your qualifying child is your son, daughter, stepchild, eligible foster child, grandchild, brother, sister, half brother, half sister, stepbrother, stepsister, your niece or nephew who at the end of the year 

A. Was any age if permanently and totally disabled at any time during the year, regardless of age.
 B. Was under age 19
C. Was under 24 and a student
D. Any of the above

21. If your child was a qualifying child of another person with a higher AGI and  you and the other person (s) cannot agree and more than one person claims the EIC, using the same child, the tie-breaker rule applies. If out of the two people you are the parent, then

A. Neither you nor the other person can claim the Earned Income Credit.
B. Both you and the other person can claim the Earned Income Credit.
C. The person with the higher AGI amount can claim the credit.
D. You can claim the credit because you are the parent, and AGI amount does not matter.

22. You cannot claim the earned income credit unless your investment income is

A. $ 2,900 or Less.
B. $ 2,700 or Less.
C. $ 2,800 or Less.
 D. $ 2,950 or Less.

23. Earned income includes the following income.

A. Wages, salaries, tips, and other taxable employee pay.
B. Net earnings from self-employment.
 C. Gross income received as a statutory employee.
 D. All of the above. 

24. Oscar, age 26, is a single taxpayer who had earned income of $9,200 in 2008. His investment income was $200. He had no other income and is not the dependent or qualifying child of another person. Assuming he meets all the other requirements, Oscar

A. Does not qualify for the earned income credit.
B. Qualifies for $ 264 of the earned income credit.
C. Qualifies for $ 280 of the earned income credit.
D. Qualifies for $ 242 of the earned income credit.

25. You have only two qualifying children living with you in tax year 2008 and are not married. Your earnings from work are a total of $28,210, and you have no other income. Assuming you meet all the requirements, what is your Earned Income Credit amount?

A. $ 802.
B. $ 2,013.
C. $ -0-. 
D. $ 2,195.

26. Your son is a qualifying child of both you and your brother, because he meets the relationship, age and residency tests for both of you. Your brother's AGI was more than yours. Under the tie-breaker rule, if you both don't agree on who will take the EIC, then

A. Both you and your brother can claim the Earned Income Credit at the same time.
 B. You can claim the credit because you are the mother and the other person is not the father.
C. Your brother is not able to claim the EIC because your son is not his foster child.
D. Your brother is able to claim the Earned Income Credit because he earned more money and the child lived with him the same amount of time during the tax year.

27. If you received advanced EIC payments in year 2008, you must

A. File a 2008 tax return only if you think they would find out.
B. File a 2008 tax return, even if you would not otherwise have to file.
 C. File a 2008 tax return only if you earned enough to file.
D. File a return only if you can't contact the IRS to ask them if you have to file.

28. You can choose to include combat pay in your earned income for purposes of computing this credit. If you are married,

A. Each of you can make this election separately.
 B. Your spouse has to make this election also.
 C. Each of you have to file separately.
D. Each of you have to file jointly.

29. 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

A. You cannot claim the EIC for the next 5 years.
 B. You cannot claim the EIC for the next 10 years.
 C. You can never claim the EIC again.
 D. You can still claim the EIC as long as you promise you will not commit fraud again.

30. Items that are considered non-earned income for Earned Income Credit purposes include interest and dividends, pensions and annuities, social security and railroad retirement benefits (including disability benefits), alimony and child support and

A. Welfare benefits.
 B. Workers' compensation benefits.
 C. Unemployment compensation (insurance).
D. All of the above.

 

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Revised: 05/21/10