Preparer: Spend enough time in this business, you think you’ve seen it all. No surprises left. Then life slaps you with a reminder—things aren’t always what they seem.
Preparer: Joan? Joan, is that you?
Joan: Yes.
Preparer: ob体育 are you?
Joan: Fine, how are you today?
Preparer: Good. Thanks for coming in.
Joan: Thank you.
Preparer: What can we do for you today?
Joan: Ok, I have a niece named Ashley. She lives with me and my brother Ed, her dad. We share the house, and we share the expenses for raising Ashley. Now, Ed and I talked about this, and he said it’s fine for me to claim Ashley on my taxes this year so I can get the Earned Income Tax Credit.
Preparer: Hold on a sec, Joan… …ah, there that’s better. There are just a few things I need to ask so I can determine if you are eligible.
Joan: Sure.
Preparer: What is your age and what is your income?
Joan: I’m 35, and I make $27,000 a year.
Preparer: And Ashley’s dad, Ed? Do you know what his income was this past year? And what is his age?
Joan: Ed makes about $5,000. He only works part-time. And he’s 50. He’s my “older” brother.
Preparer: And Ashley’s mother?
Joan: Oh, she died in a car accident over a year ago. That’s how I came to live with Ashley and Ed.
Preparer: OK, Joan, let me run down my checklist and do a little bit of calculating.
Joan: So, how’s it looking? Do I get the EITC?
Preparer: You can, indeed. You and Ed both meet the age, relationship and residency requirements. And since your income is higher, you and Ed can choose which of you wants to claim the EITC this year for Ashley.
Joan: Great. Whew! I was a little worried I had to be her parent to qualify.
Preparer: Not always. But you know Joan, it might be a different story had Ed made more than you.
Preparer: ob体育 old are you and what is your income?
Joan: I’m 35 and I make $27,000 a year.
Preparer: And Ed?
Joan: I’m not sure exactly. He works parttime. $5,000, I think. Not including the money market account.
Preparer: Money market?
Joan: When his wife died, Ed put the money from the life insurance into an investment that pays him an income – $30,000 a year.
Preparer: OK, Joan, let me run through these numbers and do a little calculating here.
Joan: So, how’s it looking? Do I get the EITC?
Preparer: This year, neither you nor Ed can claim the EITC. Since Ed has a higher income than you, the tie breaker rules don’t apply. So only Ed could claim Ashley. But Ed makes too much investment income to qualify for EITC. ob体育ever, he does have some child benefits that he can claim on his return. As for you, Joan, I’m sorry.