EITC claiming

The Earned Income Tax Credit (EITC or EIC) is the most valuable refundable tax credit available to low-and-moderate-income working individuals and families in the United States. "Refundable" means that if the credit exceeds your tax liability, the IRS sends you the difference as a refund — you can receive money even if you owe zero federal income tax.

56 steps across 12 sections

1. Gather Required Documents

  • Social Security cards for you, spouse, and all qualifying children
  • All W-2s from employers
  • All 1099 forms (1099-MISC, 1099-NEC, 1099-K for self-employment/gig income)
  • Records of any other earned income
  • Prior year AGI (for e-filing identity verification)
  • Bank account and routing numbers (for direct deposit of refund)

2. Choose Your Filing Method

  • Free File: IRS Free File (irs.gov/freefile) is available if AGI is below $84,000
  • VITA/TCE: Volunteer Income Tax Assistance and Tax Counseling for the Elderly offer free in-person preparation
  • Tax software: Commercial software (TurboTax, H&R Block, TaxSlayer, etc.) will calculate EITC automatically
  • Paid preparer: Ensure they complete Form 8867 (due diligence checklist)

3. File Form 1040 or 1040-SR

  • Complete your Form 1040 or 1040-SR (for seniors age 65+)
  • The EITC is reported on Line 27 of Form 1040
  • Use the EIC Worksheet in the 1040 instructions (or let software calculate it)
  • If you have qualifying children, you must also complete and attach Schedule EIC

4. Complete Schedule EIC (If Claiming Children)

  • Child's name and SSN
  • Child's year of birth
  • Whether the child was a student or disabled
  • Child's relationship to you
  • Number of months the child lived with you in the U.S.

5. Review for Accuracy

  • Verify all SSNs are correct
  • Confirm qualifying children meet ALL tests (relationship, age, residency, joint return, SSN)
  • Double-check filing status — if married, you must file jointly
  • Ensure all income sources are reported
  • Verify investment income is under $12,200

6. File and Wait

  • E-file for fastest processing
  • By law, the IRS cannot issue EITC refunds before mid-February (PATH Act provision) even if you file in January
  • Most EITC refunds arrive by early March if filed electronically with direct deposit
  • If filing by mail, expect 6-8 weeks for processing

7. 1. Relationship Test

  • Son, daughter, stepchild, or eligible foster child
  • Brother, sister, stepbrother, stepsister, half-brother, or half-sister
  • Grandchild, niece, or nephew
  • Adopted child (including a child lawfully placed with you for legal adoption)

8. 2. Age Test

  • Under age 19 at the end of the tax year, OR
  • Under age 24 at the end of the tax year and a full-time student, OR
  • Any age if permanently and totally disabled

9. Tie-Breaker Rules

  • If only one is the child's parent, the parent gets the credit
  • If both are parents, the parent with whom the child lived longer gets it
  • If the child lived with both parents equally, the parent with higher AGI gets it
  • If neither is a parent, the person with the highest AGI gets it

10. How the Phase-In / Phase-Out Works

  • Phase-in range: The credit increases as earned income rises (you earn more, you get more credit)
  • Plateau: The credit stays at its maximum for a range of income
  • Phase-out range: The credit gradually decreases as income rises further
  • Zero credit: Above the AGI limit, the credit disappears entirely

11. The Four Due Diligence Requirements

  • Complete and submit Form 8867 — Based on information obtained from the client or information the preparer otherwise reasonably obtains or knows. The form asks the preparer to confirm they verified ...
  • Compute the credits correctly — The preparer must complete the appropriate EIC worksheet or other computational worksheet and verify the credit amount is correct based on the taxpayer's information.
  • Apply knowledge — The preparer must not know, or have reason to know, that any information used to determine eligibility or credit amount is incorrect. The preparer must make reasonable inquiries i...
  • Retain records for 3 years — The preparer must keep copies of:
  • Completed Form 8867
  • Completed worksheets used to compute the credit
  • A record of how and when the information was obtained
  • Any documents relied upon

12. Penalties for Non-Compliance

  • $650 per failure per return for tax year 2025 (indexed for inflation annually)
  • If a return claims EITC, CTC/ACTC/ODC, AOTC, and HOH filing status, and due diligence fails for all four, the penalty can be up to $2,600 per return
  • Penalties apply even if the taxpayer was legitimately eligible — the issue is the preparer's failure to document due diligence
  • Penalties cannot be passed on to clients
  • Repeated violations can lead to suspension or disbarment from practice before the IRS

Common Mistakes

  • Claiming a child who doesn't meet the residency test
  • Relationship test errors
  • Age test errors
  • Filing status errors
  • Incorrect or missing Social Security numbers

Pro Tips

  • File even if you don't have to
  • Nontaxable combat pay election
  • Check your state credit too
  • Use IRS Free File or VITA
  • File electronically with direct deposit

Sources

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