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Find Out Whether you Qualify for the Earned Income Tax Credit (EITC) and Need to File a Schedule EIC

written by: John Garger•edited by: Laurie Patsalides•updated: 10/17/2010

Schedule EIC of the Federal Income Tax form 1040 is used to report information regarding qualifying children under the Earned Income Tax Credit. Learn whether you have qualifying children and should file a Schedule EIC with Income Tax Form 1040.

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    Federal Income Tax form 1040 uses a multitude of sub-forms called schedules to help tax payers determine and report various aspects of taxable income. Schedule EIC is the form used to report information to the Internal Revenue Service regarding qualifying children under the Earned Income Credit Tax Credit.

    Earned Income Credit is a refundable tax credit that is available for some people who work. Interestingly, the EIC may result in a refund for people who do not owe any income tax. The steps in determining qualification for the EIC are complicated, requiring tax payers to go through six steps each comprised of several questions. Claiming the EIC with qualifying children requires filing Schedule EIC along with the standard Federal Income Tax form 1040. According to the IRS, errors made by tax payers due to reckless or disregard of EIC rules can result in denial of the EIC for two years even if the tax payer qualifies in the subsequent two years. In addition, fraudulently taking the EIC disallows claiming the credit for ten years. Penalties may also apply for these behaviors.

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    Who Must File Schedule EIC

    On form 1040, tax payers determine the amount of allowable credit under the provisions of the EIC. Schedule EIC is simply used to give the IRS information regarding children claimed under the credit. Qualifying children include sons, daughters, stepchildren, foster children, brothers, sisters, stepbrothers, stepsisters, or any descendant of the above-mentioned individuals such as grandchildren, nieces, and nephews.

    The child must have been under the age of 19 at the end of the tax-paying year or under the age of 24 if the child was a student. A child claimed under EIC may be of any age if the child is permanently and totally disabled. The child must have lived with the claimant in the United States for more than half of the tax year although exceptions are allowed under special conditions. Special rules also apply if the child was married or can be claimed by someone else under the EIC.

    If you are having trouble determining whether you have a qualifying child, visit the Internal Revenue Service's website to find out whether you should file Schedule EIC and claim the Earned Income Tax Credit.

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    Conclusion

    The EIC can be claimed by some working individual tax payers. In some cases, the tax credit can be claimed even if the tax payer has no income taxes due. Those claiming EIC with qualifying children must file Schedule EIC to simply report information to the IRS regarding the child’s situation during the tax year. Failure to properly report accurate information, recklessly or fraudulently, can result in exclusion from claiming the EIC in subsequent years and can even lead to penalties.

    Always consult with a tax professional for questions about your tax liability and tax credit situation.