Earned Income Credit Requirements

Earned Income Tax Credit (EITC) Requirements for People with Children

The IRS is requiring more proof that your child is actually a qualifying child for purposes
of the Earned Income Tax Credit.  The form that tax preparers have to fill out and send in
along with your tax return is the Paid Preparer’s Earned Income Credit Checklist
( The quick and dirty summary is: if a tax preparer
doesn’t ask enough questions and fails to get enough information before submitting your
EITC tax return, he/she will be subject to a $500 fine. Ouch! That’s $500 PER tax return. A few
bad tax returns can put us out of business.

There are 3 "tests" that have to be met to qualify for EITC.

Relationship Test:
•        Your son, daughter, adopted child, stepchild, foster child or a descendent of any
      of them such as your grandchild
•        Brother, sister, half brother, half sister, step brother, step sister or a descendant
      of any of them such as a niece or nephew

Age Test:
•        younger than 19
•        younger than 24 and a full-time student
•        child of any age who is permanently and totally disabled

Residency Test:
•        Child must live with you (or your spouse if you file a joint return) in the United States
      for more than half of the year (exceptions apply for temporary absences for special
      circumstances, e.g., children who were born or died during the year, children of
      divorced or separated parents, and kidnapped children)

Child's Residency: Items you can get to prove that the child you’re claiming EITC for really lives
with you:

•        School records or statement (letter from school on letterhead or report card for 2013)
•        Landlord or property management statement (must state your name & child's name living
with you)
•        Health care provider statement (written on letterhead)
•        Medical records (Dr bill showing child's name and your name and address)
•        Child care provider records
•        Placement agency statement
•        Social service records or statement (usually on front page has your name and lists all
members of your
                                               family that are covered - must be dated for 2013)
•        Place of worship statement (written on letterhead)
•        Employer statement (again on letterhead)

For EITC, we have always needed a copy of your ID and the children's social security cards. If
you have brought them in before, we should have made a photocopy of them.  We will not be
able to file your return if we do not have this in our records. If you are unsure if we have them,
please call the office and we will check before you come in or better yet, just bring it with you
to your appointment.

Along with those copies, we will need to keep copies of additional documentation proving that
you are eligible for this credit. In order to qualify for the Earned Income Tax Credit,you must
provide the necessary documents that are required in the new IRS regulations. We will be
making copies of all of your documents and we are required by law to hold copies of those
documents for three years.

You don’t need to have all of these things, but you’ll need at least one thing to show your child
lives in your house. The school records are probably the easiest if your child is of school age
or a letter from Social Services (DFS) if you receive Food Stamps, Temporary Assistance and/or
MO HealthNet (Medicaid). Just remember it has to be dated from 2013 as that is the year of
taxes we are filing. Just like it would need to be a report card from the end of 2013 (or
beginning of 2013-2014 school year). Make sure that whatever you get is on letterhead and has
both the child’s information and your information, including your correct address.

Disabled Child: If you are claiming a disabled child, you’ll need to prove the disability. Here are
the documents for that:

•        Doctor statement
•        Other health care provider statement
•        Social services agency or program statement

So with a disability, you have a double issue—proving residence and the disability. Although to
be quite honest, I suspect that these statements would also include a home address on them
and serve a duel purpose.

Self Employed: And if you’re self-employed, you’re going to need to prove you really have some
sort of business with the following records:

•        Business license
•        1099MISC forms
•        Records of gross receipts
•        Income summary
•        Expense summary
•        Bank statements

These records are pretty standard for anyone who is self employed anyway so this shouldn’t be
a burden. Bottom line here is—if you have a business, you need to run it like a business and
keep proper business records.

The IRS has already announced that people can expect their refunds to be delayed this year.
For the fastest possible refund, you want to make sure that you’ve got all of your paperwork
together before you even head to the tax office.

IMPORTANT:  Only one person can claim the same child. If a child qualifies for more than one
person and one of the persons is a parent or parents, the non-parent can claim the child only if
their AGI is higher than the parent(s). If the child qualifies another relative and the parent AGI
rules do not apply, the taxpayers choose. If more than one person claims the same child, IRS
applies the tiebreaker rules.