Example 3. Sharon Rose

Sharon Rose does not have a qualifying child, and her modified AGI is too high for her to claim the EIC.

Sharon Rose is age 63 and retired. She received $7,000 in social security benefits during the year and $4,850 from a part-time job. She received pension payments of $6,000. Only $5,000 of those payments are taxable. Sharon had no other income. She lived alone in the United States for the entire year and cannot be claimed as a dependent on anyone else's return. She does not have any investment income and does not have a qualifying child.

Sharon reads the steps for eligibility in her Form 1040A instructions. In Step 3 she discovers that, because part of her pension is not taxable, she must use Publication 596 to find out if she can get the EIC.

To find her modified AGI, Sharon starts with her AGI of $9,850 ($4,850 + $5,000), the amount on line 20 of her Form 1040A. To that amount, she adds $1,000, the nontaxable part of her pension. The result is her modified AGI, $10,850, which is not less than $10,380 (the limit on modified AGI for people who do not have a qualifying child). She cannot take the EIC. She completes the rest of her Form 1040A and files it with the IRS.

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