You may be eligible for the earned income credit if you are absent temporarily only because of military service. To be eligible for the credit, you must plan to return to your main home where your qualifying child lives, at the end of your assignment. Service in a combat zone is a temporary absence.

Age test. The age test is met if your child is:

• Under age 19 at the end of the year,
• A full-time student under age 24 at the end of the year, or
• Permanently and totally disabled at any time during the tax year, regardless of age.

Persons Without a Qualifying Child. If you do not have a qualifying child, you can take the credit if you meet all the following rules.

1) You must have earned income during 2003.

2)Your earned income and adjusted gross income must each be less than $11,230 ($12,230 for married filing jointly).

3)Your filing status cannot be married filing separately.

4)You (or your spouse, if filing a joint return) cannot be a qualifying child of another person. See Qualifying child of another person, earlier.

5)You (or your spouse if filing a joint return) must be at least age 25 but under age 65 at the end of your tax year.

6)You (or your spouse, if filing a joint return) cannot be claimed as a dependent by anyone else on that person’s return.

7)Your main home must be in the United States for more than half the year. (U.S. military personnel stationed outside the United States on extended active duty are considered to live in the United States.)

8)You cannot file Form 2555, Foreign Earned Income, or Form 2555–EZ, Foreign Earned Income Exclusion.

9)You must be a U.S. citizen or resident alien all year unless:

• You are married to a U.S. citizen or a resident alien, and
• You choose to be treated as a resident alien for the entire year.

10)Your investment income must be $2,600 or less during the year. For most people, investment income is taxable interest and dividends, tax-exempt interest, and capital gain net income.

11)You (and your spouse, if filing a joint return) must have a valid SSN. In either case, you can use only a valid SSN issued by the Social Security Administration. If a social security card for you or your spouse says, “Not valid for employment” and the SSN was issued only so that you or your spouse could get a federally funded benefit, you cannot get the credit.

How to report. If you meet all of these rules, fill out the EIC worksheet in your tax forms instructions to figure the amount of your credit.

Enter “No” directly to the right of line 63 (Form 1040), next to line 41 (Form 1040A), or on line 8 (Form 1040EZ) if you cannot claim the credit because:

• Your earned income was $11,230 ($12,230 for mar­ried filing jointly) or more,
• You (and your spouse, if filing a joint return) were under age 25 or age 65 or more,
• Your home was not in the United States for more than half the year,
• You (or your spouse, if filing a joint return) were a qualifying child of another person in 2003, or
• You (or your spouse, if filing a joint return) did not have a valid SSN.

Earned Income. For purposes of the earned income credit, earned income includes:

• Wages, salaries, and tips
• Net earnings from self-employment, and
• Gross income received as a statutory employee

For purposes of the earned income credit, earned income does not include:

• Basic pay or special, bonus, or other incentive pay that is subject to the combat zone exclusion,
• Basic Allowance for Housing (BAH)
• Basic Allowance for Subsistence (BAS)
• Any other nontaxable employee compensation
• Interest and dividends
• Social security and railroad retirement payments
• Certain workfare payments
• Pensions or annuities
• Veterans’ benefits (including VA rehabilitation payments)
• Workers’ compensation
• Unemployment compensation, or
• Alimony and child support

IRS Will Figure Your Credit for You. There are certain instructions you must follow before the IRS can figure the credit for you. See Publication 967, The IRS Will Figure Your Tax.

Advance Earned Income Credit

You must meet all the following rules to qualify for the advance earned income credit in 2004. You must meet all of the following requirements.

• You must work and expect that your earned income and AGI will each be less than a certain amount. The amount in 2003 was $29,666 ($30,666 for married filing jointly). The amount for 2004 will be higher. See the 2004 Form W–5, Earned Income Credit Advance Payment Certificate, for the 2004 amount.
• You must have a qualifying child.
• You must meet all the rules explained in the instructions for Form W-5.

Previous

• 1
• 2
• 3
• 4

Next