Examples

The following two comprehensive examples (complete with filled-in forms) may be helpful when figuring the earned income credit. The two examples are:

1. John and Janet Smith with one qualifying child and using Form 1040A, and
2. Kelly Green, age 30, a student, with no qualifying child and using Form 1040EZ.

Example 1. John and Janet Smith (Form 1040A)

John and Janet Smith are married and will file a joint return. They have one child--Amy, who is 3 years old. Amy lived with John and Janet for all of 2001. John worked and earned $9,500. Janet worked part of the year and earned $1,500. Their total earned income and modified AGI is $11,000. John and Janet qualify for the earned income credit and fill out the EIC Worksheet and Schedule EIC. The Smiths will attach Schedule EIC to Form 1040A when they send their completed return to the IRS.

They took the following steps to complete Schedule EIC and the EIC Worksheet.

Completing Schedule EIC

Smith's Schedule EIC

The Smiths complete Schedule EIC because they have a qualifying child. They enter "John and Janet Smith" and John's SSN (the SSN that appears first on their Form 1040A) on the line at the top of Schedule EIC. The Smiths fill out Qualifying Child Information (lines 1-6).

Line 1. The Smiths enter the first name and last name for Amy in the column "Child 1."

Line 2. They enter Amy's SSN. (See Rule 7, earlier.)

Line 3. They enter the year of birth for Amy (1998).

Lines 4a and 4b. The Smiths skip these lines because Amy was not born before 1982.

Line 5. The Smiths enter "Daughter" for Amy. This column shows Amy's relationship to John and Janet.

Line 6. The Smiths enter "12" for Amy. This is how many months Amy lived with them in 2001.

Completing the EIC Worksheet

Next, the Smiths will complete the EIC Worksheet to figure their earned income credit amount.

Line 1. The Smiths enter $11,000 (their total earned income).

Line 2. The Smiths go to the Earned Income Credit Table in the Form 1040A instructions. The Smiths find their income of $11,000 within the range of $10,750 to $13,100. They follow this line across to the column "One child" and find $2,428 and enter it on this line 2.

Line 3. The Smiths enter their modified AGI of $11,000.

Line 4. The Smiths check the "Yes" box because lines 1 and 3 are the same ($11,000). They skip line 5 and enter the amount from line 2 ($2,428) on line 6.

Line 6. The Smiths' EIC is $2,428.

Smith's EIC Worksheet

Example 2. Kelly Green (Form 1040EZ)

Kelly Green is age 30 and a full-time student. She lived with her parents in the United States for all of 2001. She had a part-time job and earned $6,040. She earned $20 interest on a savings account. She is not eligible to be claimed as a dependent on her parents' return. Although she lived with her parents, she is not their qualifying child because she does not meet the age test. She does not have any children.

Kelly qualifies for the earned income credit. Kelly will file Form 1040EZ and complete the EIC Worksheet.

Completing the EIC Worksheet

Kelly figures the amount of her earned income credit on the EIC Worksheet as follows.

Line 1. She enters $6,040 (her total earned income).

Line 2. Kelly goes to the Earned Income Credit Table in the forms instruction booklet. She finds her earned income of $6,040 in the range of $6,000 to $6,050. Kelly follows this line across to the column "No children" and finds $358. She enters $358 on line 2.

Line 3. Kelly enters $6,060 (her modified AGI).

Line 4. Kelly checks the "No" box because lines 1 and 3 are not the same ($6,040 and $6,060).

Line 5. Kelly checks the "No" box because the amount on line 3 ($6,060) is not less than $5,770. She goes to the Earned Income Credit Table in the forms instruction booklet. She finds her modified adjusted gross income of $6,060 in the range of $6,050 to $6,100. Kelly follows this line across to the column "No children" and finds $355. She enters $355 on line 5. She looks at the amounts on lines 5 and 2. $355 is the smaller amount.

Line 6. She enters $355 here and on Form 1040EZ, line 9a. The $355 is Kelly's earned income credit.

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