Glennn's Question on EITC

[Tax Pro]

I ran across that EITC-related WBT question mentioned in our 5/28 meeting:

Glen is 29 years old and shares an apartment with his sister, Ida.  Ida is 35 years old.  Glen and Ida are US citizens and earned income of $12,000 and $30,000, respectively.  Ida's daughter, Sandy, is 12 years old and has lived in the Studio City apartment with her mother and uncle for two years.  If Ida claims Sandy as her qualifying child for purposes of Earned Income Tax Credit (EITC), which of the following is true?

A. Glen can claim the EITC without a qualifying child.

B. Glen cannot claim the EITC because his earned income is too high.

C. Glen cannot claim EITC (with or without qualifying child) because, under the tiebreaker rules, his qualifying child is the qualifying child of another taxpayer.

D. Glen cannot claim the EITC because he is over 25.

The more I look at this question, the more I cringe about the prospect of getting that letter requiring me to take the EITC class before I can prepare taxes next year.

[Tax Pro]

Choice A. is a very popular wrong answer.  Do we really know the EITC rules?  lol.

Aren't we glad we have this study group?

----- Forwarded Message -----
From: [name withheld; but sender gets a prize for studying and answering this trivia question at 1 am]
To: Tax Pro <taxpr...@ymail.com>
Sent: Tuesday, June 11, 2013 12:59 AM
Subject: Re: Glennn's Question on EITC

My answer is A. :) I love trivia question.

---

From: Tax Pro <taxpr...@ymail.com>;
To: enrolled-agen...@googlegroups.com <enrolled-agen...@googlegroups.com>;
Subject: Glennn's Question on EITC
Sent: Tue, Jun 11, 2013 7:54:00 AM

[Tax Pro]

The correct answer is C.  (As we discussed in the meeting, just because Glen got beaten by Ida in claiming Sandy for EITC purposes, he cannot turn around and claim EIC as a taxpayer with no qualifying children; he has one, Sandy).

Reference: Publication 596, Chapter 2, page 18:

"If you cannot claim the EIC because your qualifying child is treated under the tiebreaker rules as the qualifying child of another person for 2012, you may be able to take the EIC using a different qualifying child, but you cannot take the EIC using the rules in chapter 3 for people who do not have a qualifying child."

And Pub 596, Chapter 3, page 23 reiterates:
"If you have a qualifying child. If you meet Rule 8, you have a qualifying child. If you meet Rule 8 and do not claim the EIC with a qualifying child, you cannot claim the EIC without a qualifying child."

Here is the link to Pub 596. http://www.irs.gov/pub/irs-pdf/p596.pdf

[Tax Pro]

I almost forgot about this one.  The brave responder to this EITC question gets a free 3-hr one-on-one tutorial on any of the three EA Exam Prep (2012) WBTs as her preparation tool for the SEE1, SEE2, or SEE3.

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[Josie]

Yeah!!!!!! Thank you.

Thank you,

Josie Martinez

[IdaRowe Tuttle]

Glenn, while it is true that the problems we get for exams and in practice problems miss a few things. we need to remind everyone that if you have an installment sale and do not charge interest, you may have imputed interest. Unstated interest.   If your sale calls for payments in a later year and the sales contract provides for little or no interest, you may have to figure unstated interest, even if you have a loss. See Unstated Interest and Original Issue Discount (OID) under Other Rules, later.from publ. 537.  When I read your comment about interest, it clicked that if you don't charge interest, you may still  have to claim it for an installment sale.