New option to qualify for the Earned Income Tax Credit

Thanks to new legislation more people will qualify for the Earned Income Tax Credit (EITC) and some people will receive a larger credit.

A new provision under the Taxpayer Certainty and Disaster Tax Relief Act of 2020, allows you to elect to use your 2019 earned income to figure your 2020 Earned Income Tax Credit if your 2019 earned income is more than your 2020 earned income.

If your earned income was too low in 2020, using your 2019 earned income could get you a larger credit.

The Earned Income Tax Credit is a credit for people with low to middle incomes.  The maximum adjusted gross income that will qualify for the credit is $56,844 for 2020 tax returns.

The new legislation is great news for people with lower incomes who have been financially impacted by the pandemic.

It’s a refundable credit which means people may get money back if the amount of the credit exceeds the amount of any tax owed.

The amount of credit is complex and varies according to income, family size, and filing status. You must have earned income or a certain disability income to be eligible.  This means you must have income from working for someone else or own your own business or farm.

The credit can be as much as $6,600, depending on your income, filing status, and the number of qualifying children. People without children could be eligible for a credit of up to $538.

Children must meet certain relationship, residency, age requirements to be a qualifying child.

It is important to know the requirements when claiming a qualifying child.  If you take the credit for children who don’t qualify, in addition to large penalties the IRS may disallow the credit for the next 10 years. The IRS audits a relatively high number of people who claim the Earned Income Tax Credit.

The EITC is complex, consequently many people claiming the credit make mistakes.  It’s a good idea to get help if you are not sure how to correctly claim the credit.

Claiming the EITC increases your chances of being audited. The IRS estimates that between 21 percent to 26 percent of EITC claims are in error.  It is very easy and cost-effective for the IRS to audit people who claim the EITC. They generally send a letter requesting documentation to prove that the child qualified. It is very inexpensive for the IRS to simply send a letter. This eliminates the IRS cost of an office visit.

If you use a tax professional, it’s best to use one who is knowledgeable and experienced. You’re responsible for what’s on your tax return even when someone else prepares it for you.

David Zubler is a tax accountant and Enrolled Agent in East Tennessee, providing tax strategies and representing clients before the IRS and has over 25 years of tax experience. He is the author of four tax books and is the founder and president of Your Tax Care. The company provides business and tax education to the public at its website, David can be reached at (865) 363-3019 or contacted by email at