Tax Question - EIC Credit

[JohnDoe]

I hope you don't mind I am posting tax question here. When I refer to "I" in the following question - it's not me.

My Question:
I'm single and live with my girlfriend. We have 2 kids(ours) that live with us. My girlfriend filed as head of household and claimed the kids as dependents. She makes too much money to qualify for the EIC tax credit.

I am filing as single with no dependents and made 11k in wages 8k in unemployment. Should I be able claim the 2 kids for the EIC tax credit? Turbo tax says I can and it boots my return from $1600 to over $6000.

Thanks.

[jwkde]

Your earnings were 11K and you can get a 6k refund? Not familiar with EIC but that seems odd

[rothlev]

I do taxes for H & R Block, and this comes up all the time. Either of you may claim your own children as long as you have lived with them at least 6 months of the year. In your situation the girlfriend may want to file an amendment taking the children off of her return, and you would file a a paper return claiming them. girlfriend would likely need to repay some money to the IRS, or if she hasn't cashed the check yet, mail it back with the amendment. you would file as single, not head of the household if most of the income came from your girlfriend.

[rothlev]

"
Your earnings were 11K and you can get a 6k refund? Not familiar with EIC but that seems odd "

yes, 11k is around the top of the bell shaped earned income tax credit curve, and generates around a $4600 credit. add some refundable child tax credits and that is what the refund would be. The unemployment neither helps the credit nor hurts it. Good deal. it is perfectly legal to put the children on whichever parents return generates the higher credit when unmarried parents live together.

[JohnDoe]

Turbo tax didn't care who claimed them as dependents. It seems to matter who claims them for the EIC tax credit and since she exceed the income limit, she didn't claim them for purposes of EIC tax credit.

Why would she need to drop them off her return as dependents?

To claim them on my return, I didn't need to add them as dependents.

Thanks.

[rothlev]

Since you are not married only one of you can claim the children. Whoever claims them gets all the child credits involved. In a divorce situation there is an option for splitting benefits. If you try to claim the children while they are on your girlfriends return, your return will reject.

[rothlev]

you can claim them for only earned income tax credit if you want, but your girlfriend cannot get the dependency in that situation.

[Sue J]

Only one of you can claim the kids for EIC. Single or HOH doesn't matter and either of you can claim the kids, but not both. You can even each claim one kid. If the mom makes too much then the dad should claim both since his income is fairly small.

EARNED income does not include unemployment but it does include self employment from your business or 1099-MISC income that you earn.
What is Earned Income?

Check out the EIC tables here -
Publication 596 (2009), Earned Income Credit (EIC)

So, yes, a person filing HOH or single with an income of $11,000 can get a refundable EIC of $3043 if claiming one child or $4410 if claiming both children.

[Sue J]

Here is an estimator -
Tips and Guidance for Estimating Credit Amount

[rothlev]

Head of Household status is applicable if you provide more than half of your households support. ( ie : rent, food, etc... )
If your income is low enough it may not matter which filing status you use, but you cannot use head of household unless you are paying more than 1/2 of your households bills. It gives you a higher standard deduction.

[JohnDoe]

Quote:

Originally Posted by rothlev Since you are not married only one of you can claim the children. Whoever claims them gets all the child credits involved. In a divorce situation there is an option for splitting benefits. If you try to claim the children while they are on your girlfriends return, your return will reject.

Ok. That's the point I wasn't clear on. TT didn't imply that.

Unfortunately, I already filed her return and requested a check refund. I will need to run both returns each way and see if it makes a difference in total return. If so, I'll look into filing the amended return for her - she hasn't got the check yet, though.

Thanks!

[rothlev]

Most likely the best option will be for you ( lower income parent) to take all the tax credits , ie: earned income tax credit, child tax credit, dependency and dependent care credit if involved.

[JohnDoe]

Ok, here is the verdict.

When I remove the kids as dependents from her return, it goes from +3251 to -103 for federal.

When I add the kids for EIC credit to his return, it goes from 1640 to 6300. When I also add the kids as dependents on his return, it goes from 6300 to 8414. (TT had option for nondependent - used for EIC/dependent care only)

So combined, that's about an additional $3500 by switching this around. Does that sound about right?

Thanks everyone for the quick responses!

[rothlev]

sounds right to me!!

[frayne]

Just a suggestion, you may want to go into an H&R Block office and have them check your numbers as well as your tax strategy. They have a product called "second look" and for $30 it could be money well spent in your case. Also remember amended returns have to be mailed in and can take anywhere from 12-16 weeks or longer to process. If your GF has already filed and you haven't, her return will have to be amended before you can take the EIC, dependency, or child tax credits on your return.

Just my two cents.

[rothlev]

I work for H & R Block. Certainly, they will do a review. The amendement if you ask them to file it will cost around $100.
The easiest way to do this is to do an amendment after gf's return goes thru, with a clear explanation. Return the IRS check. Do not cash it. Put BF paper return in the same envelope, with a note asking IRS to process both returns at the same time. Make sure the explanation is clear.

The turn around will be around 12 - 16 weeks. The amendments are taking longer this year.

[walkinwood]

Does this mean, that in certain circumstances, you can get a "refund" that is greater than the amount withheld from your pay-check (or paid in estimated taxes)?

[ERD50]

Quote:

Originally Posted by walkinwood Does this mean, that in certain circumstances, you can get a "refund" that is greater than the amount withheld from your pay-check (or paid in estimated taxes)?

Yes! Welcome to the world of "Refundable Tax Credits"!

I wonder how these play into the stats that show things like ~ 50% of filers pay no taxes? How about the ones that get paid to file?

-ERD50

[JohnDoe]

Well, I am not sure if the girl friend wants to do this. Apparently the boyfriend might have back child support he owes and she's afraid she won't see any of the money if the check comes in his name.

Who knows, I'm not asking twice and I'm not interested in getting involved in their business any more than I have to.

[ERD50]

Quote:

Originally Posted by JohnDoe Well, I am not sure if the girl friend wants to do this. Apparently the boyfriend might have back child support he owes and she's afraid she won't see any of the money if the check comes in his name. Who knows, I'm not asking twice and I'm not interested in getting involved in their business any more than I have to.

So do I have this right?

The BF has already received $8K in unemployment from the taxpayers, and he's looking for an added $4,600 by claiming his GF's kids as his dependents, while at the same time, he isn't paying for the support of his own kids?

Further, while the GF is afraid that " she won't see any of the money if the check comes in his name." - wouldn't that money actually go to support his kids? Why wouldn't they at least do that - spite?

Well, I'm not sure I really want to know. I sure understand your second point.

-ERD50