Tax Lesson 14 - Earned Income Credit

This tax topic will teach you the rules and regulations regarding claiming the earned income credit. The earned income credit (EIC) is a tax credit for certain people who work and have earned income. A tax credit usually reduces the amount owed and may give you a refund even if you have had no money withheld or have made no estimated tax payments along the year.

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Use  IRS Publication 596 to complete this topic.

Complete a tax return for Abeque Morris.

Her Children who lived with her all year are:

    Son: James Gowdy.....(626-12-6525) DOB 4-17-1997

    Daughter: Nellie Gowdy....(688-54-5661) DOB 6-18-1995

Abeque was single and was the only person that supported her family in 2008.

she also received Interest income from her bank account  $390.

Complete  Form 1040A and Schedule EIC (Form 1040) using the following W2 information.

All information on W2 is current, including address information.

 

 

1. Look at the Form 1040A you prepared for Abeque Morris. What is the amount on Form 1040A, Line 40a?

A. $ 5,450.
B. $ 4,680.
C. $ -0-. 
D. $ 4,764.

2. Look at the Form 1040A you prepared for Abeque Morris. What is the amount on Form 1040A, Line 45a?

A. $ -0-.
B. $ 4,764.
C. $ 4,772. 
D. $ 4,688.

3. A married person filing a joint return may get more EIC than someone with the same income but a different filing status.                

True False

4. Any refund you receive because of the EIC and any advance EIC payments you receive will be considered income when determining whether you are eligible for the benefit programs.                         

True False

5. The IRS may ask you to provide documents to prove you are entitled to claim the earned income credit. The IRS will tell you what documents to send them. These documents may be

A. Birth certificates.
B. School records.
C. Medical records. 
D. Any of the above.

6. If you received advance payments of EIC in 2008, you must file Form 1040 or Form 1040A to report the payments. This amount will show on your

A. Form W-2, box 1.
B. Form W-2, box 9.
C. Form W-2, box 10.
 D. Form W-2, box 17.

7. Your AGI is $34,500, you are single, and you have one qualifying child. You cannot claim the EIC because your AGI is not less than

A. $ 33,995.
B. $ 34,500.
C. $ 33,241. 
D. $ 39,783.

8. You don't have a valid SSN if your Social Security card reads

A. "Valid for work only with INS authorization".
B. "Valid for work only with DHS authorization".
C. "Not valid for Employment".
 D. None of the above.

9. If you are married, you usually must file a joint return to claim the EIC. Your filing status cannot be

A. Single.
B. Married Filing Jointly.
C. Head of Household. 
D. Married Filing Separately.

10. If you are married and your spouse did not live in your home at any time during ________ of the year, you may be able to file as Head of Household, instead of married filing separately. In that case, you may be able to claim the EIC.

A. The first 6 months of the year.
B. Any 6 months of the year.
C. The last six months of the year. 
D. The last month of the year.

11. If you (or your spouse, if married) were a nonresident alien for any part of the year, you cannot claim the earned income credit unless your filing status is

A. Single.
B. Married Filing Jointly.
C. Head of Household. 
D. Married Filing Separately.

12. You cannot claim the earned income credit if you file

A. Form 1040A or Form 1040EZ.
B. Form 2555 or Form 2555-EZ.
C. Form 540A or Form 540EZ. 
D. Form 2441 or Schedule 2.

13. Nontaxable pay for members of the Armed Forces is considered earned income for EIC.                        

True False

14. To qualify for the EIC as a student, your child must be, during some part of any 5 calendar months during the calendar year

A. A full-time student at a school that has a regular teaching staff, course of study, and regular student body at the school.
B. A student taking a full-time, on-farm training course given by a school that has a regular teaching staff, course of study, and regular student body.
 C. A student taking a full-time, on-farm training course given by a state, county, or local government. 
D. All of the above.

15. For the residency test, your home can be any location where you regularly live. The following is an example of a home.

A. Homeless shelter.
B. A van or a spot under a bridge.
C. A mobile home. 
D. Any of the above.

16. To claim the EIC, you must be at least age 25, but under age 65 at the end of 2008. If you are married and filing a joint return, you are age 22 and your spouse is age 33. You

A. Do not meet the age test because you are not age 25.
B. Meet the age test because your spouse is at least age 25, but not over 65.
C. Can only claim half of the EIC because only your spouse qualifies, since she is the only one that is over age 25. 
D. None of the above.

17. To qualify for the earned income credit with a qualifying child, you must meet which test?

A. Relationship test.
B. Age test.
C. Residency test. 
D. All of the above.

18. Having a qualifying child who lives with you in your home for more than 6 months meets what test?

A. Age test
B. Relationship test
C. Residency test
D. Gross income test

19. If your Earned Income Credit was denied, send Form 8862 if it was denied because

A. You loaned your dependents to your friend
B. You claimed a dependent that was not yours
C. You and your spouse each tried to claim the earned income credit
D. Any of the above

20. Your qualifying child is your son, daughter, stepchild, eligible foster child, grandchild, brother, sister, half brother, half sister, stepbrother, stepsister, your niece or nephew who at the end of the year 

A. Was any age if permanently and totally disabled at any time during the year, regardless of age.
 B. Was under age 19
C. Was under 24 and a student
D. Any of the above

 

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Revised: 08/08/11