BRADLEY SERVICES                            2848 Suite D Deans Bridge RD.
                                                       706-305-9393                                                   Augusta, GA 30904
EARNED INCOME
Earned Income Credit

2014 Tax year:
The Earned Income Credit is a refundable credit for low-income workers with earned income. The credit is
available for taxpayers with or without children. You could be entitled to a refundable credit of up to $3,305  (if
you have one qualifying child), $5,460 (if you have two qualifying children), $6,143 (if you have more than two
children), or $496  (if you have no qualifying children).

You have earned income if you work for someone else or if you are self-employed. If you were in a combat zone
during the year, you may elect to use your combat pay to determine the greatest credit amount.

You can increase your refund by any remaining credit if your withholdings and Earned Income Credit amount are
greater than the tax liability you may have on your tax return.


Rules for the Earned Income Credit
Valid Social Security Number
Qualifying Child for the Earned Income Credit
Tie-Breaker Rule if More Than One Person Can Claim the Credit
Earned Income Credit - No Qualifying Children
How Does the Advance Earned Income Credit Work?
Earned Income Credit - Fraudulent or Reckless Claim
Claiming the Earned Income Credit after Disallowance

Rules for the Earned Income Credit

To qualify for the EIC, you must meet the following requirements:

You must have earned income. If you are married and file a joint return, you meet this rule if at least one spouse
has earned income.
For 2009, your earned income and adjusted gross income must both be less than:
$13,440 ($18,440 if Married Filing Jointly) if you have no qualifying children
$35,463 ($38,463 if Married Filing Jointly) if you have one qualifying child
$40,295 ($45,295 if Married Filing Jointly) if you have two qualifying children
$43,279 ($48,279 if Married Filing Jointly) if you have three or more qualifying children
You (and your spouse if Married Filing Jointly) must have a Social Security number (SSN) that allows you to
work. Your Social Security card cannot say "not valid for employment."
You must include on your return a valid SSN for each person you claim as a qualifying child on Schedule EIC,
Earned Income Credit.
Your filing status cannot be Married Filing Separately.
You must be a U.S. citizen or resident alien all year.
You must not have filed Form 2555, Foreign Earned Income, or Form 2555-EZ, Foreign Earned Income
Exclusion.
Generally, you must not have more than $3,100 of investment income (i.e., interest, dividends, net income from
rent, net capital gain, and net passive income that is not self-employment income). If qualifying children are used
for the credit, they must meet the Relationship, Age, and Residency Tests. A qualifying child cannot be used by
more than one person to claim the EIC.
If no qualifying children are used for the credit, you must be at least age 25 but under age 65.
You cannot be the qualifying child of another person or be claimed as a dependent on another return.
You must have lived in the United States for more than half of the year. Members of the military on extended
active duty outside the United States are considered to be in the United States during the duty period.
Even if you are not required to file a return because you did not earn enough during the year, you may still
qualify for the EIC. However, to get the credit, you must file a return and meet all the rules.

For example, James and Terri are married and have two children, ages 4 and 7. All of them are U.S. citizens and
lived in the same home in the U.S. all year. No one else lived with them and neither James nor Terri can be
claimed as a dependent on another person's return. They plan to file a joint return. James is self-employed and
had a net profit from his business of $31,000. Terri is unemployed and received unemployment benefits of
$2,400. James received $17 in interest from a savings account. James and Terri have no other income or
expenses. They will be able to claim the EIC on their joint return because they meet all the conditions listed
above: one of them has earned income, they are not filing a separate return, their earned income and adjusted
gross income are under $45,646, and their investment income is under $3,100.

Valid Social Security Number

To claim the EIC, you must have a valid Social Security number (SSN) that allows you to work. Additionally, your
spouse (if Married Filing Jointly) and any qualifying child you list on Schedule EIC must also have valid SSNs. An
SSN is a number issued by the Social Security Administration to a U.S. citizen or to a person who has permission
to work in the United States. This permission to work in the United States was previously granted by the
Immigration and Naturalization Service (INS), but is now granted by the U.S. Citizenship and Immigration Services
(USCIS), a bureau of Homeland Security. If your spouse's, any qualifying child's, or your own SSN is missing from
your tax return or is incorrect, the IRS may disallow your EIC.

If the Social Security card says "Not valid for employment" and the card was issued so that you could get a
federally funded benefit (such as Medicaid), you cannot claim the EIC. 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, request a new card (one without the legend "Not valid for employment") from the Social Security
Administration. If your Social Security card reads "Valid for work only with INS authorization," then you do have a
valid SSN.

You cannot get the credit if you, your spouse, or your qualifying child has:

An Individual Taxpayer Identification Number (ITIN) which is issued to a non-citizen who cannot get a SSN
An Adoption Taxpayer Identification Number (ATIN) which is issued for a child to adopting parents who have not
yet received an SSN for the child being adopted
If you (or your spouse if Married Filing Jointly) do not have a SSN, you can apply for one by filing Form SS-5 with
the Social Security Administration. If you do not have a valid SSN by the filing deadline for your tax return, you
can either:

Request an automatic 6-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.
File the return on time without claiming the EIC. After receiving the valid SSN, file an amended return, Form
1040X, claiming the EIC. Attach a filled-in Schedule EIC, Earned Income Credit, if you are using a qualifying child
to obtain the credit.

Qualifying Child for Earned Income Credit

Generally, your qualifying child is a child who meets all of the following tests:

Relationship Test - Your qualifying child must be your:
Child (son, daughter, stepchild, adopted child, or eligible foster child) or descendant (for example, grandchild or
great grandchild)
Sibling, half sibling, stepsibling, or descendant (for example, nephew or niece)
Age Test - Your qualifying child must be under age 19, a full-time student under age 24, or any age if
permanently and totally disabled.
Residency Test - Your qualifying child must have the same main home as you for more than half the year.
Your qualifying child cannot be used by more than one person to claim the EIC. If a child is the qualifying child
for you and another person, you will need to decide who will claim that child. If both of you claim the same child,
the IRS will use the tie-breaker rule to determine who can claim the child as a qualifying child and receive the
allowed tax benefits including EIC.  
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Tie-Breaker Rule if More Than One Person Claims the Credit Based on the Same Qualifying Child

If only one of you is the child's parent, the parent will receive the credit for that child.
If both of you are the child's parents and you do not file a joint return together:
The parent with whom the child lived the longest period of time during the year will receive the credit for the child.
If the child lived with both parents the same amount of time, the parent with the highest adjusted gross income
will receive the credit for the child.
If none of you are the child's parent, the person with the highest adjusted gross income will receive the credit for
the child if that person has a higher AGI than either parent.
For example, Dana is 27 years old and lives with her 3-year-old son, chris, and her mother, Bridgette. Dana
earned $14,000 in wages. Bridgette also works and earned $25,000. Alex meets all of the tests to be a qualifying
child for Dianna and Bridgette. Because only one of them can use chris as a qualifying child and claim the EIC,
they should decide which one of them will use chris as a qualifying child. If Dana and Bridgette both filed tax
returns using chris as a qualifying child and claiming the EIC, Dana will be the one allowed to use chris as a
qualifying child and to claim the EIC because she is chris's parent.

What if Dana had been living with chris's father, Martin, to whom Dianna is not married, and Martin's adjusted
gross income was higher than Dana's?  If Dana and Martin both filed tax returns using chris as a qualifying child,
Martin would be the one allowed to use chris as a qualifying child and claim the EIC, because chris lived with
both parents the same amount of time and Martin's adjusted gross income is higher.

Earned Income Credit - No Qualifying Children



You may still be eligible for the EIC if you do not have a qualifying child if you meet all of the applicable rules,
and you (or your spouse if filing a joint return) were at least age 25 but under age 65 at the end of the year.


How Does the Advance Earned Income Credit Work?  

If you qualify for the EIC and you have a qualifying child, you can file Form W-5, Earned Income Credit Advance
Payment Certificate, with your employer to receive part of the basic credit in each paycheck.

If at any time during the year your circumstances change and you are no longer eligible for the EIC, you will have
to repay the amount advanced to you when you file your return. To stop the advance payments, you must
complete a new Form W-5 and give it to your employer. If you receive advance EIC, you must file a return even if
it is not otherwise required.



Earned Income Credit - Fraudulent or Reckless Claim  

You will not be eligible for the EIC if the IRS has determined that you have previously claimed the credit
fraudulently or recklessly. A fraudulent claim results in a 10-year loss of eligibility. A reckless claim results in a
two-year loss of eligibility.



Claiming the Earned Income Credit after Disallowance


If you received a notice of deficiency denying your EIC for a previous year and you want to claim the EIC for
current tax-year, you usually need to complete Form 8862, Information to Claim Earned Income Credit After
Disallowance, and attach it to your return. You do not need to complete Form 8862 if both of the following apply
to you:

You are claiming the EIC without a qualifying child for the current year.
Your EIC for the earlier year was reduced or disallowed solely because one or both of the children listed on your
Schedule EIC were not your qualifying children for that year.