Earned Income Credit (Course Id 633)

Taxes - Taxes for Course Id 633

The Earned Income Credit (EIC) is a refundable tax credit that has a significant impact on United States revenue  and, in the 2022 tax year, amounted to about $64 billion claimed by more than 31 million tax filers.

In a recent year, 153.8 million individual federal tax returns were filed, and 19.6 million—12.7% of individual taxpayers—claimed the Earned Income Credit. Based on that percentage, it would not be unexpected that any tax return preparer will prepare the tax returns for many EIC claimants.

NASBA QAS - Text - NASBA Registry - IRS Enrolled Agents - 633

Course Learning Objectives

• Apply the earned income credit rules to determine if a taxpayer is eligible for the tax credit;
  
• Identify the common errors committed in connection with the earned income credit;
  
• Describe the consequences of the IRS’ disallowance of the earned income credit; and
  
• Recognize the tax return preparer’s EIC due diligence requirements.

Chapter 1
Earned Income Credit Rules

• Recognize the EIC eligibility rules that apply to all taxpayers;
  
• Identify the EIC eligibility rules applicable to taxpayers who have a qualifying child;
  
• List the EIC eligibility rules that apply to taxpayers who do not have a qualifying child; and
  
• Recognize how the EIC for which an eligible taxpayer qualifies is determined.

Chapter 2
Earned Income Credit Errors

• Recognize the incidence of errors in claiming the earned income credit and their probable causes;
  
• Identify the estimated impact of earned income credit errors on federal revenue;
  
• List the most common earned income credit errors and their potential problem areas; and
  
• Recognize the additional questions tax preparers need to ask if taxpayer-provided information appears incorrect, inconsistent or incomplete.

Chapter 3
EIC Disallowance

• List the principal tools used by the IRS to verify the propriety of EIC claims and to prevent or recover improper EIC payments;
  
• Identify the additional requirements imposed on taxpayers claiming the EIC following disallowance;
  
• Recognize the exceptions applicable to the requirement that a taxpayer file IRS Form 8862 following disallowance of an EIC claim;
  
• Determine the year in which an IRS Form 8862 must be filed to claim EIC after the IRS has disallowed it; and
  
• Recognize the duration of the prohibition against filing for the EIC in the event a taxpayer’s EIC error is determined to be the result of reckless/intentional disregard of EIC rules or fraud.

Chapter 4
EIC Due Diligence

• List the due diligence requirements a tax return preparer must meet when preparing a tax return claiming the earned income credit;
  
• Recognize the records a tax return preparer is required to keep to support a client’s claim for the earned income credit;
  
• Identify the penalties that may be imposed on a tax return preparer for failing to comply with due diligence requirements when preparing a client’s tax return claiming the earned income credit; and
  
• Identify the sanctions that may be imposed on an employer whose employee fails to comply with EIC due diligence requirements.

Course Learning Objectives

Introduction to The Course

Chapter 1 - Earned Income Credit Rules

Learning Objectives

Introduction

Eligibility to Receive EIC

EIC Rules Applicable to Everyone

Adjusted Gross Income Limits

Valid Social Security Number Required

Tax Filing Status

Separated Spouses

Citizenship or Residency

Foreign Earned Income

Investment Income

Earned Income

EIC Rules That Apply Only if the Taxpayer Has a Qualifying Child

Relationship, Age, Residence and Joint Return Tests

The Relationship Test

The Age Test

Student Defined

Permanently and Totally Disabled Defined

The Residency Test

Exception for U.S. Military Stationed Outside the U.S.

The Joint Return Test

Child Must Have Valid Social Security Number

Taxpayers with Qualifying Children who Fail to Meet Identification Requirements

Qualifying Child of More than One Person Rule

Tiebreaker Rules

Qualifying Child of Another Taxpayer Rule

EIC Rules That Apply if Taxpayer Does Not Have a Qualifying Child

The Age Rule

Death of Spouse During Year

The Dependent of Another Person Rule

The Qualifying Child of Another Taxpayer Rule

The Main Home Rule

Figuring the Amount of the Earned Income Credit

Calculating Earned Income for EIC Purposes

Taxpayers Not Self-Employed, Statutory Employees, Clergy or Church Employees

Self-Employed Taxpayers, Statutory Employees, Clergy and Church Employees

Summary

Chapter Review

Chapter 2 - Earned Income Credit Errors

Learning Objectives

Introduction

Incidence of Earned Income Credit Errors

Factors Leading to Earned Income Credit Errors

Estimated Revenue Impact of Earned Income Credit Errors

Common Earned Income Credit Errors

Earned Income Credit Errors Involving Qualifying Children

Qualifying Child Requirements

When a Child is Disabled

Avoiding Qualifying Child Earned Income Credit Errors

Earned Income Credit Errors Involving a Client’s Filing Status

Single Filing Status

Head of Household Filing Status

Married Persons Living Apart

Avoiding Filing Status Earned Income Credit Errors

Earned Income Credit Errors Involving Income Reporting

Avoiding Income Reporting Earned Income Credit Errors – Red Flags

Earned Income Credit Errors Involving Social Security Numbers

Avoiding Social Security Number Earned Income Credit Errors

Summary

Chapter Review

Chapter 3 - EIC Disallowance

Learning Objectives

Introduction

IRS Efforts to Reduce Improper EIC Payments

Claiming EIC after Disallowance

IRS Form 8862 Timing

Filing IRS Form 8862

Exceptions

Client Consequences of EIC Disallowance

Disallowance Due to Reckless or Intentional Disregard of EIC Rules

Disallowance Due to Fraud

Summary

Chapter Review

Chapter 4 - EIC Due Diligence

Learning Objectives

Introduction

Tax Preparer Due Diligence a Statutory Requirement – IRC §6695

Due Diligence Requirements

Paid Preparer’s Due Diligence Checklist – IRS Form 8867

Due Diligence Questions to Ask to Avoid Qualifying Child Errors

Paid Preparer’s Due Diligence Checklist Best Practices

EIC Computation

Computation Best Practices

Know the Law and the Client – Ask the Right Questions

When Should a Preparer Ask Additional Questions – Examples

Knowledge Requirement Best Practices

Record Maintenance

Record Maintenance Best Practices

Failure to Meet Due Diligence Requirements

Consequences for the Tax Return Preparer

Possible Consequences for the Preparer’s Employer

Summary

Chapter Review

Glossary