Chapter 5
Disallowance of the EIC

If your earned income credit (EIC) for any year after 1996 was denied (disallowed) or reduced by the IRS, you may need to complete an additional form to claim the credit for 2001.

This chapter is for people whose earned income credit (EIC) for any year after 1996 was denied or reduced by the IRS. If this applies to you and you want to claim the credit for 2001, you may need to complete Form 8862, Information To Claim Earned Income Credit After Disallowance, and attach it to your 2001 return. This chapter explains when you need to attach Form 8862.

This chapter also explains the rules for certain people who cannot claim the EIC for a period of years because their EIC was denied or reduced.

Form 8862

If your EIC for any year after 1996 was denied or reduced for any reason other than a mathematical or clerical error, you must attach a completed Form 8862 to your next tax return if you wish to claim the EIC. The date on which your EIC was denied and the date on which you file your 2001 return affect whether you need to attach Form 8862 to your 2001 return or to a later return. The following examples demonstrate whether Form 8862 is required for 2001 or 2002.

Example 1. Form 8862 required for 2001 You claimed the EIC on your 2000 tax return, which you filed in March 2001. The IRS questioned the EIC, you were unable to support your claim, and, in September 2001, you received a statutory notice of deficiency telling you that an adjustment would be assessed unless you filed a petition in the Tax Court within 90 days. You did not act on this notice within 90 days. Therefore, your EIC was denied in December 2001. If you wish to claim the EIC on your 2001 return, you must complete and attach Form 8862 to your return.

Example 2. Form 8862 required for 2002 The facts are the same as in Example 1, except that you received the statutory notice of deficiency in February 2002. Because the 90-day period referred to in the statutory notice is not over when you are ready to file your return for 2001, you should not attach Form 8862 to your 2001 return. However, if you wish to claim the EIC for the year 2002, you must complete and attach Form 8862 to your return for that year.

Exception for mathematical or clerical errors. If your EIC was denied or reduced as a result of a mathematical or clerical error, do not attach Form 8862 to your next tax return. For example, if your arithmetic is incorrect, the IRS can correct it. If you do not provide a correct social security number, the IRS can deny the EIC. These kinds of errors are called mathematical or clerical errors.

Omission of Form 8862. If you are required to attach Form 8862 to your 2001 tax return, and you claim the EIC without attaching a completed Form 8862, your claim will be automatically denied. This is considered a mathematical or clerical error. You will not be permitted to claim the EIC without a completed Form 8862.

Additional documentation may be required. You may have to provide the IRS with additional documentation before a refund relating to the EIC you claim is released to you even if you attach a properly completed Form 8862 to your return.

Are You Prohibited From Claiming the EIC for a Period of Years?

If your EIC for any year after 1996 was denied and it was determined that your error was due to reckless or intentional disregard of the EIC rules, then you cannot claim the EIC for the next 2 years. If your error was due to fraud , then you cannot claim the EIC for the next 10 years. The date on which your EIC was denied and the date on which you file your 2001 return affect the years for which you are prohibited from claiming the EIC. The following examples demonstrate which years you are prohibited from claiming the EIC.

Example 3. Cannot claim EIC for 2 years You claimed the EIC on your 2000 tax return, which you filed in March 2001. In October 2001, the IRS denied your claim and determined that your error was due to reckless or intentional disregard of the EIC rules. You cannot claim the EIC for tax year 2001 or 2002. If you wish to claim the EIC on your return for 2003, you must complete and attach Form 8862 to your return for that year.

Example 4. The facts are the same as in Example 3, except that the IRS did not disallow your 2000 EIC until after you filed your 2001 return. You cannot claim the EIC for tax year 2002 or 2003. If you wish to claim the EIC on your return for 2004, you must complete and attach Form 8862 to your return for that year.

Example 5. Cannot claim EIC for 10 years You claimed the EIC on your 2000 tax return, which you filed in February 2001. In December 2001, the IRS denied your claim and determined that your error was due to fraud. You cannot claim the EIC for tax years 2001 through 2010. If you wish to claim the EIC on your return for 2011, you must complete and attach Form 8862 to your return for that year.

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