Taxes - beware of "Earned Income Credit""

It may be late in the game but for all those who have not filed yet, there are new rules for the EIC that allow it to be available to more tax payers than before. DON'T TAKE IT! Of course, it depends on your own situation. What happened to me is that when geting taxes done by H&R Block, their system added it in automatically. A few hundred dollars. But my bottom line tax owing was thousands more than last year, even though my income was about the same. I vaguely remembered this from the past and asked tax lady to delete the EIC. At first she said she couldn't but when I insisted, and office manager did it. BAM! The extra thousands that I owed disappeared! So, the IRS has the software systems sneaking in this little credit that then costs you much more in taxes. Very disappointed in my tax lady because she's the one who taught me about that specific give-and-take many years ago but this year thought it could not be changed because the system figured it automatically. Taxes befuddle me so I am sure many of you know more about it but still beware of Earned Income Credit!

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Not true! A tax CREDIT can NEVER increase your tax liability, it can only reduce the liability or result in a refund if the credit is more than the liability.

I just don't see how that's possible.

I also don't think this is possible. The Earned Income Credit is a credit. The credit is added AFTER all taxes are calculated. Something does not compute. This is direct from the IRS website: "The Earned Income Tax Credit, EITC or EIC, is a benefit for working people with low to moderate income. To qualify, you must meet certain requirements and file a tax return, even if you do not owe any tax or are not required to file. EITC reduces the amount of tax you owe and may give you a refund." [www.irs.gov] There is no way that I can see that a credit could result in greater tax liability.

Shopping Southeast Pennsylvania, Delaware above the canal, and South Jersey since 2008

I wonder if it's something funky in the software system. I did my taxes online through H & R Block using their free file. I go to school and am eligible to take the American Opportunity credit. The software gave me another credit instead which was substantially less. Turns out I forgot to check some little box at the bottom of a previous screen.

***facepalm**

Kim

Edited 2 time(s). Last edit at 03/16/2019 02:53AM by kimmiemae.

I did a tax shop this year, where the preparer told me it would be to my advantage to NOT declare my self-employment income. He even showed me on a calculator how my refund would decrease if I claimed my self-employment income. No recognition at all that IRS requires reporting of self-employment income.

Wowsa.

Unfortunately, due to the particular ICA I signed for this shop, I am not allowed to say the business' name, nor the MSC.

I don't know how it really works but all I know is that when the $300 EIC was present I owed thousands. When removed, I owed nothing. Something to do with it clashing with the schedule C or some other form. Just saying, if you get an EIC, try the taxes with and without it to see if there is a difference. There was for me, a big one!

I'm going to say your "auto EITC" is added because this allows them to charge you for it. To remove it takes a manager.to take it off. (just a guess) Perhaps it was on there from last year and auto filled the form out. When I do my taxes, last years employers appear on auto fill and they manually have to remove them.

We checked and I had no EIC last year. And didn't owe thousands then either. Just be wary, guys, that's all.

I find it hard to believe. A couple hundred of EIC should not trigger thousands in taxes. EIC is a refundable credit and would not increase taxes. If anything, it should decrease them.

I agree. The removal or the inclusion of the EIC should not change your taxes by “thousands”. OP, I hope they didn’t eliminate your Schedule C and the reporting of your mystery shop (or other) income. From the limited info you provided that seems like a possibility. Review your forms carefully and make sure all of your income us still being reported.

Edited 1 time(s). Last edit at 03/17/2019 10:08PM by kenasch.

It wasn't the earned income credit, it was the change to the tax laws that took effect this year. My Tax Dude told me about it.

There was extra money in my W-2, so big I didn't notice it. My refunds were significantly lower.

"I told myself to quit you; but I don't listen to drunks." -Chris Stapleton

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Taxes - beware of "Earned Income Credit""

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