Publication 596 (2005), Earned Income Credit (EIC)

Chapter 5. Disallowance of the EIC

Table of Contents

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 2005.

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, you may need to complete Form 8862, Information To Claim Earned Income Credit After Disallowance, and attach it to your 2005 return to claim the credit for 2005. This chapter explains when you need to attach Form 8862. For more information, see Form 8862 and its instructions.

This chapter also explains the rules for certain people who cannot claim the EIC for a period of years after 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 math or clerical error, you must attach a completed Form 8862 to your next tax return to claim the EIC. You must also qualify to claim the EIC by meeting all the rules described in this publication.

However, do not file Form 8862 if either (1) or (2) below is true.

After your EIC was reduced or disallowed in the earlier year:
1. You filed Form 8862 in a later year and your EIC for that later year was allowed, and
2. Your EIC has not been reduced or disallowed again for any reason other than a math or clerical error.
You are taking the EIC without a qualifying child for 2005 and the only reason your EIC was reduced or disallowed in the earlier year was because the IRS determined that a child listed on Schedule EIC was not your qualifying child.

Also, do not file Form 8862 or take the EIC for:

2 years after there was a final determination that your EIC claim was due to reckless or intentional disregard of the EIC rules, or
10 years after there was a final determination that your EIC claim was due to fraud.

For details, see Are You Prohibited From Claiming the EIC for a Period of Years? in this chapter.

The date on which your EIC was denied and the date on which you file your 2005 return affect whether you need to attach Form 8862 to your 2005 return or to a later return. The following examples demonstrate whether Form 8862 is required for 2005 or 2006.

Example 1.

You filed your 2004 tax return in March 2005 and claimed the EIC with a qualifying child. The IRS questioned the EIC, and you were unable to prove the child was a qualifying child. In September 2005, you received a statutory notice of deficiency telling you that an adjustment would be made and tax assessed unless you filed a petition with the Tax Court within 90 days. You did not act on this notice within 90 days. Therefore, your EIC was denied in December 2005. To claim the EIC with a qualifying child on your 2005 return, you must complete and attach Form 8862 to that return. However, to claim the EIC without a qualifying child on your 2005 return, you do not need to file Form 8862.

Example 2.

The facts are the same as in Example 1, except that you received the statutory notice of deficiency in February 2006. Because the 90-day period referred to in the statutory notice is not over when you are ready to file your return for 2005, you should not attach Form 8862 to your 2005 return. However, to claim the EIC with a qualifying child for 2006, you must complete and attach Form 8862 to your return for that year. To claim the EIC without a qualifying child for 2006, you do not need to file Form 8862.

Exception for math or clerical errors. If your EIC was denied or reduced as a result of a math 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 math or clerical errors.

Omission of Form 8862. If you are required to attach Form 8862 to your 2005 tax return, and you claim the EIC without attaching a completed Form 8862, your claim will be automatically denied. This is considered a math or clerical error. You will not be permitted to claim the EIC without a completed Form 8862.

Additional documents may be required. You may have to provide the IRS with additional documents or information 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 2005 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.

You claimed the EIC on your 2004 tax return, which you filed in March 2005. The IRS determined you were not entitled to the EIC and that your error was due to reckless or intentional disregard of the EIC rules. In September 2005, you received a statutory notice of deficiency telling you an adjustment would be made and tax assessed unless you filed a petition with the Tax Court within 90 days. You did not act on this notice within 90 days. Therefore, your EIC was denied in December 2005. You cannot claim the EIC for tax year 2005 or 2006. To claim the EIC on your return for 2007, 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 your 2004 EIC was not denied until after you filed your 2005 return. You cannot claim the EIC for tax year 2006 or 2007. To claim the EIC on your return for 2008, you must complete and attach Form 8862 to your return for that year.

Example 5.

You claimed the EIC on your 2004 tax return, which you filed in February 2005. The IRS determined you were not entitled to the EIC and that your error was due to fraud. In September 2005, you received a statutory notice of deficiency telling you an adjustment would be made and tax assessed unless you filed a petition with the Tax Court within 90 days. You did not act on this notice within 90 days. Therefore, your EIC was denied in December 2005. You cannot claim the EIC for tax years 2005 through 2014. To claim the EIC on your return for 2015, you must complete and attach Form 8862 to your return for that year.