Screen EIC - Earned Income Credit (1040)

Overview

Earned Income Credit

Any filing status is acceptable except married filing separately. UltraTax CS doesn't calculate the earned income credit for nonresident alien or dual-status taxpayers. Form 2555 filers receiving the foreign earned income exclusion, foreign housing exclusion or foreign housing deduction aren't eligible for the earned income credit.
Qualifying dependents in the Names and other information statement will need to have a Dep code of
1
,
5
,
7
, or
10
and a Social Security number (not ITIN) in the SSN column. Dependents 19 years of age or older will need to have an entry in the
Student/Disabled
column of the same statement, and the number of months in the home will need to be greater than 6. Enter
12
as the number of months in the home for children born in
2024
. Also, if the Date of Birth column is left blank, UltraTax CS doesn't assume the dependent hasn't met the age requirement.
Qualifying children claimed every other year for dependency purposes (i.e., who utilize a Mos Home code of
77
,
88
, or
99
in the
Dependent information
statement in the
1040
screen), but who qualify for the EIC during a period of non-dependency, will need to have a Dep code of
5
to be counted for EIC purposes.
For taxpayers with no qualifying children, UltraTax CS assumes the age requirement is met if the taxpayer / spouse dates of birth are left blank. For UltraTax CS to perform a test of the age requirement (at least age 25 but less than 65), you'll need to enter a date of birth. UltraTax CS calculates the credit if either spouse meets the age requirement.
If the taxpayer and spouse are filing jointly and you enter a Social Security number for both the taxpayer and spouse, UltraTax CS assumes the Social Security numbers enable the taxpayer or spouse to work. If this isn't true, enter
X
in
Not qualifying for earned income credit
.
UltraTax CS assumes the taxpayer or spouse, if filing jointly, aren't qualifying children of another person in the current year. If this isn't true, enter
X
in
Not qualifying for earned income credit
.
UltraTax CS assumes the taxpayer's main home, and spouse if filing jointly, was in the United States for more than half the year. (Military Personnel on extended duty outside the United States are considered to be living in the United Stated during that duty period.) If this isn't true, enter
X
in
Not qualifying for earned income credit
.
UltraTax CS assumes a qualifying child lived with the taxpayer in the United States for over half the year. If this isn't true, enter dependent code
6
, Children who lived with this client but don't qualify for EIC, in the Dependents statement in the
1040
screen.
UltraTax CS assumes that qualifying children on Schedule EIC couldn't be considered the qualifying child of another person. If this isn't true, enter the child's relationship to this other person in the
EIC
screen.
UltraTax CS assumes the qualifying children have valid Social Security numbers. For purposes of the EIC, a valid SSN is a number issued by the Social Security Administration unless "Not Valid for Employment" is printed on the Social Security card and the number was issued solely to apply for or receive a federally funded benefit. If this isn't true, enter
X
in the
Not qualifying for earned income credit
.
UltraTax CS doesn’t distinguish between taxpayers who can claim the EIC for people with a qualifying child and those that can claim the EIC for people without a qualifying child. If the taxpayer, or spouse if filing jointly, can't claim the EIC for people who don’t have a qualifying child, enter
X
in
Not qualifying for earned income credit
.

Pension or annuity from nonqual plan included in wages

Enter the amount received as a pension or annuity from a nonqualified deferred compensation plan or a section 457 plan that's included on Form 1040, line 7, Form 1040A, line 7, Form 1040-EZ, line 1, or Form 1040NR, line 8. Don’t include any amounts already entered in the

W2

screen, box

11

. Amounts entered in this field are used in the calculation of earned income for the Earned Income Credit, and Additional Child Tax Credit.

Adjustment to earned income

Enter the amount of the adjustment to the calculated earned income on line 8 of the Earned Income Credit Worksheet. A negative entry is treated as a subtraction from earned income. For exempt ministers who qualify for earned income credit, enter the amount of net Schedule C income.

Disqualifying investment income (Force)

UltraTax CS calculates disqualifying investment income based on information entered elsewhere. Disqualifying investment income includes interest (taxable and tax-exempt), dividends, your child's interest and dividend income reported on your return, your child's tax-exempt interest reported on Form 8814, line 1b, net rental and royalty income, net capital gain income, other portfolio income, and net passive income. Gain that's treated as long-term gain under section 1231 (a)(1) of IRC isn't disqualifying investment income. Section 1245, 1250, 1252, 1254, and 1255 gain isn't considered long term gain under section 1231 (a)(1) and is included in the calculation of disqualifying income for purposes of the EIC. UltraTax CS automatically calculates this amount and provides a worksheet. Enter an amount here to override the calculated amount.

Not qualifying for earned income credit

Enter

X

in this field to suppress the earned income credit calculation.

Have IRS figure the credit

Enter

X

to have the IRS to figure the credit. UltraTax CS prints EIC next to line 66a.

Elect to include nontaxable combat pay in earned income

Enter

T

(Taxpayer),

S

(Spouse), or

B

(Both) in this field to elect to include nontaxable combat pay as a component of earned income. UltraTax CS includes 100 percent of nontaxable combat pay entered in the

W2

screen in earned income for purposes of calculating the Earned Income Credit. This election can be made separately for the taxpayer or spouse or can be made for both the taxpayer and spouse. For more information on making the election to include nontaxable combat pay as a component of earned income, see IRS Publication 596, Earned Income Credit (EIC).