Can I Claim My Friend’s Child on My Taxes?


Mom with little girl reading book in sofa

Even if you feel like they’re your kids, do not claim children that do not belong to you on your tax return for EIC.


I cannot tell you how many times I’ve heard this scenario:

My friend has 2 kids but she didn’t work last year.  She wants me to claim them for her on my taxes and we’re going to split the money.  Should I do it?

The answer is, NO!  Absolutely not!  It’s tax fraud.  Those children are not yours so claiming them on your tax return is illegal.

But she says we won’t get caught!  

Oh sure, you might not get caught right away, but someone might disapprove of what you’re up to and tell.  For example, let’s say the children’s father finds out and he reports you.  He could make a real problem for you.

The father is out of the picture, he’ll never tell.

Okay, then what happens when she decides that you didn’t give her enough of the refund?  I’ve seen it happen hundreds of times.  The friend claims the kids, the child’s mother gets upset over something and then turns the friend into the IRS for fraud.  Seriously, it happens all the time.  I’m not joking.

My friend’s not like that, we’re like sisters!

You’re like sisters until the child’s father comes back into her life.  Or that new boyfriend decides that he wants some of that tax money.  Or she thinks you cheated her.

Good friends stay good friends when money isn’t in the way.  If there is a problem, and there will be a problem, you will be the one who has committed fraud, not her.  You will be the one who has to pay back the tax, not her.  You will be the one in trouble with the IRS, not her.  Are you listening?  All of the risk is on you.

A good friend won’t ask you to cheat on your taxes.  Sure you’ve probably seen people do it and get away with it.  We’ve all seen people game the system one way or another.  But that doesn’t make it right.  And it doesn’t mean they won’t get caught either.

If I don’t do it, someone else will.  

Probably.  But at least it won’t be you.  You’ll have a clear conscience and you’ll be able to sleep at night.

If you want to know who can legally claim a child for EITC, use the IRS EITC assistant.  When you go to the link, answer all of the questions honestly.      EITC Assistant

It’s a really good tool and will tell you who you can and cannot claim.  It asks very specific questions about your relationship with the dependent you are claiming.  Here’s a clue:  “foster child” means a child that has been placed in your home by the court.  You can’t just call a child your “foster child” because you spend a lot of time with them.  And niece and nephew mean the child of your brother or sister, not the child of your friend.  If you don’t pass the test using the EITC assistant, then do not try to claim EIC on those children.  It’s that simple.

Will your friend be mad at you for turning her down?  Probably yes.  If she’s a real friend, she’ll get over it.  If she’s not a real friend, then you made a real good decision by turning her down didn’t you?

Tax Tips for Single Parents

Kids can be a real advantage on your tax return

Having a baby really changes your taxes. Make sure you know the rules.


Welcome to the world of parenthood.  Raising kids is hard enough with help but it’s even harder when you’re alone.  Here are some tips to help you navigate the changes that will happen to your tax return, because you deserve a little help once in awhile.


Claiming your baby as a dependent:  If you are earning income (over $4,000), then you’re going to want to file a tax return and claim your baby as a dependent.  I sometimes hear women say they didn’t claim their children because the child was born in December and they read the child is supposed to live with you for 7 months.  In the year of birth, you claim the child even if she was born on December 31st.  Let’s be honest.  If you’ve jut gone through a pregnancy, that child has been living with you for more than 7 months anyway.  Claim your baby!  We’ll talk a little more about possibly letting someone else claim the baby, but unless there are special circumstances, plan on it being you.


Changing your filing status:  If yo’re on your own and supporting yourself, then once your baby is born you will change your filing status from Single to Head of Household.  It gets a little more complicated if you are living with your parents, the baby’s father or someone else.  The issue becomes, who is providing most of the support for the child?  If you’re using computer software, there are all sorts of questions you can ask to determine how much support is provided to the baby and by whom.  But here’s a quick and easy technique that’s pretty helpful.  If you prepare the tax return with Head of Household status, and then switch it to Single status and the refund amount is exactly the same, then claim Single as your filing status.  If your income is so low that your refund won’t change then you really don’t need Head of Household status.  The IRS will audit returns claiming HH status when the income is too low.   They never audit Single for the income being low.  Why not just avoid a headache that you don’t need? The Earned Income Credit amount is the same for Single as for Head of Household filers.


What about letting someone else claim the baby?  If you are living with the baby’s father and it would benefit you to have the child on his tax return instead of yours, then that’s fine.  If you are living with your parents and they are supporting you and the baby, you can let your parents claim the child.  Your parents would have to make more money than you do to be able to do this though.


Letting anyone outside of you, the father, or a grandparent claim your child on a tax return has the potential to get you into trouble and even land you in jail for tax fraud.  There are a few situations where it can be done, but for that you should go see a professional.  A new boyfriend who is not the baby’s father can NEVER claim your child for EIC. NEVER!  The rules regarding dependents change often.  Things that were allowed a few years ago aren’t allowed now.  Sometimes well meaning friends and relatives can give you bad advice which could get you into big trouble.  Protect yourself.


The Earned Income Credit:  Many single moms, especially when they’re just starting out, qualify for the Earned Income Tax Credit.  It’s a refundable credit, that means you get the money even if you didn’t pay any tax into the system.  EIC is a big deal and can make a huge difference on your refund.  That’s why people may want to try and claim your baby for you.  There’s billions of dollars a year of EIC fraud.  That’s also why you need to be careful, the IRS is very aggressive about pursuing EIC fraud.  Don’t let anyone else claim your child.


Protect your child’s social security card like it was gold.  It’s that valuable.  Infant identity theft happens all the time.  You won’t know it’s happened until you file your tax return and it gets rejected because someone else has claimed your child.  Do not carry the card around in your purse or wallet.  Store it someplace safe.


Congratulations on your new baby!




Tax Strategy for Exes that Get Along

Rear view of young couple consulting financial advisor at office desk

Exes who work together with their tax professional can often reduce their overall taxes or increase their refund, leaving them more money to spend on their children.


If you have a child with an ex-spouse, or even someone that you weren’t married to, you might already know how complicated the whole tax situation can get.  Who can claim what? And if you now hate each other, then it’s really a problem.


But—if you and your ex get along and you want to work together to make the best situation for your child—then I’ve got a tax strategy for you to help you maximize your refund.


This strategy only works for couples that get along, and basically share physical custody.  If this sounds like you and your ex, then you two are perfect candidates to work together on your taxes.  If your ex is an absentee parent stop, this isn’t for you.  If your ex is a nasty person, stop, this isn’t for you either.


If your ex is a decent, trustworthy human being, then you can continue.


The first step is for you and your ex to do your own taxes the way you normally should.  For example:  let’s say your divorce decree states that you are the custodial parent and your ex gets to claim the exemption for the child.  That’s how you prepare your taxes and set the baseline for what your refund or balance due should be.


An example might help.  Let’s say that Barbie and Ken had a child named Penny and then got divorced.  Although Barbie and Ken basically share custody of Penny, if push comes to shove, in the divorce decree, Barbie is the custodial parent.  Per the decree, Ken is allowed to claim Penny’s exemption every other year.   So the way for them to file is for Barbie to claim the head of household filing status, but not claim Penny’s exemption.  Barbie also gets the Earned Income Tax Credit and the Child Care Credit for Penny’s daycare expenses.  Ken gets the exemption, and the Child Tax Credit.


That’s how you determine the baseline for Barbie and Ken.  Let’s say that in this example, Barbie would get a refund of $1500 and Ken would get a refund of $1000.  Together they get $2500.


There are FOUR Scenarios to this.  When preparing your taxes, you’re going to run all four scenarios:


  1. YOU claim no child, single, 1 exemption for yourself. EX claims:   2 exemptions; one for his/herself, one for child, AND claim EIC and head of household and child care credit


  1. YOU claim child for EIC and head of household filing status and child care credit, 1 exemption for yourself, no exemption for child, sign 8332 to other parent. EX claims:  2 exemptions; one for him/herself, one for child, no EIC, no head of household


  1. YOU claim 2 exemptions; one for yourself, one for child, no EIC, No head of household, EX claims:  child for EIC and head of household filing status, 1 exemption for him/herself, no exemption for child, sign 8332 to other parent.


  1. YOU claim 2 exemptions; one for yourself, one for child, AND claim EIC and head of household and child care credit. EX claims:  no child, single, 1 exemption for self.


Let’s plug the numbers for Barbie and Ken in here.  Scenario 1: Barbie owes $800 and Ken gets a refund of $4500.  The combined refund is $3700.


Scenario 2: this is our baseline. Barbie gets a $1500 refund, Ken gets a $1000 refund.  The combined refund is $2500.


Scenario 3:  Barbie gets $1000 refund, Ken gets $3100.  The combined refund is $4100.


Scenario 4:  Barbie gets $2600 refund and Ken owes $900.  The combined refund is $1400.


So in Barbie in Ken’s case, it makes send to let Ken claim EIC and head of household filing status and have Barbie claim the exemption.  It gives them back and extra $1600!


Now Barbie has a right to her $1500, and if she files using scenario #3, she’s losing $500.  So to make Barbie whole again, Ken would need to pay her back the $500 from his refund.  And they would also have to agree on how to use the extra refund money.

I always recommend that you put the extra money you get into a savings account or 529 plan for your child.  The only reason you can do this is because of your kid, so I think the money should go towards raising your child.  But it’s up to you.


Remember, only parents that get along can do this.  If you hate each other, then you strictly go by the IRS rules for divorced or separated parents.   Once you do this, you can’t go back to the IRS because you changed your mind.


Put proper safeguards in place.  If you’re the parent that will get a lower refund than you normally would have, make sure that your ex sets up the part of his/her refund that makes you whole will come as a direct deposit into your bank account.

Make sure the part of the refund that is supposed to go to your child goes into your child’s account as well.


Remember, this strategy is not for everyone.  But for some families, it can be worth a decent amount of money.

Why Is My Tax Preparer Asking Me Such Nosy Questions?

With all the questions the IRS requires tax preparers to ask, getting your taxes done can seem more like an interrogation than tax prep.

With all the questions the IRS requires tax preparers to ask, getting your taxes done can seem more like an interrogation than tax prep.


I took a phone call from a fellow awhile back who was absolutely furious about some of the questions his tax preparer had asked him.  The preparer had asked a whole bunch of questions about his kids and even asked to see their report card from school.  He said, “My daughters are 4 and 2 years old.  They don’t even go to school yet!”


So what’s going on here?


It’s all related to an IRS form—# 8867.  Form 8867 has to be filled out and sent in with every tax return that has the Earned Income Tax Credit.  Now, this form has been around for awhile, but it used to be that a tax preparer was just supposed to ask some questions and you’d keep that information to yourself.  Now, the IRS expects you to send the form in with the tax return.  If a tax preparer doesn’t complete the form and send it in with an EIC return—the IRS charges a $500 penalty to the tax preparer.



That’s $500 per return.  You miss too many of those and you could be out of business.    For most preparers, that’s more than what we charge to prepare an EIC return.


Now if you prepare your own tax return, you don’t have to worry about form 8867, it’s only for paid tax preparers.  But if you have your taxes done at H&R Block, or Jackson Hewitt, or even me—that form must be completed, and signed, and sent with your tax return.  (If your tax return is e-filed, we are required to keep the signed copy in our files.)


And the form seems to ask for more and more information every year.  Now there’s a whole section about documents:  documents to prove your kids live with you, documents to prove a disability, and documents to prove self-employment income.   Tax preparers are now expected to look at a taxpayer’s documents to verify the information on an EIC tax return.  School records, like report cards, are usually the easiest thing to use for documentation.  Of course, report cards aren’t very helpful when your children aren’t in school yet.  No documents, no form 8867.  No form 8867, no tax return.  No tax return, no refund.


It’s like the IRS is trying to turn regular tax preparers into the EIC police.  It’s not a job we asked for, but it’s a regulation that we’re required to enforce.  The penalties are so stiff that we’ll all be out of work if we don’t go along.


So remember, if you tax preparer asks to see your child’s report card, he doesn’t care if your son got a D in math or is a straight A student;  he’s just trying to help you get your refund.

Tax Refund for Christmas 2013

82/365 - my christmas eve buddy.

Photo by B Rosen at


If you normally use your income tax refund to pay for your Christmas presents, listen up.  You’ve got a problem.


First, nobody is doing Christmas loans.  Remember when H&R Block and Jackson Hewitt used to provide loans against your refund?  Then the IRS changed the “debt indicator” which made it almost impossible for anyone to offer those loans.  A few companies provided Refund Anticipation Loans, (the loans where you got your refund in 1 or 2 days instead of two weeks) but they were few and far between.  Most people had to wait for two to three weeks to get their refund.


Now the IRS has announced that tax filing will be delayed—meaning that instead of accepting tax returns on January 21st like they had previously announced—they won’t accept returns until January 28th, and maybe not until February 4th.


What does this have to do with Christmas?  Well, if you’re putting holiday gifts on your credit card in the hopes of paying it off with your tax refund—you’re not getting your refund until mid to late February at the earliest.  If you can’t afford to pay your credit cards without your tax refund—you’ve got a problem.


So what other options do you have?   For some people, if you know that you’re going to have a refund on your taxes, you can change your withholding now so that you get more money in your paycheck.  If you’re reading this in October or early November, you’ve got a chance to put away some extra cash for presents.  If it’s already December by the time you see this—it’s probably too late.


Here’s something else you need to know.  If you have your taxes done by one of those corner shop tax companies, they will gladly take your money and tell you that they’re filing your return.  You might think that you’re filing on January 3 or 4th, but you’re not.  What they’re doing is “stockpiling” your return.  They hit a button, it gets sent to a big corporate server, but it just sits there until the IRS says they’re accepting returns.


Why is that important to know?  Because people think that they need to file early to get their refunds.  But those early returns are often wrong.  They’re missing information, or the software’s not fully functional yet.  The IRS needs time to work out the glitches and if the IRS is having glitches, so are all the other tax companies.  If you have the big green tax company send your tax return to their server and then you discover a problem with it, you can’t take your tax return back.   It’s too late.  And if your tax return is sent in with a mistake it could delay your refund for weeks, or even months.


There aren’t a lot of options out there for using your upcoming tax refund to pay for this year’s holiday gifts.  But you know what?  Christmas comes every year.  Every year!  Once you do receive your refund, it might be the only time in the whole year that you’ve got extra cash.  Take some of your refund money and stick it in the bank so you’ve got cash to pay for your 2014 Christmas.    Seriously, you never want to be dependent upon the IRS for you to have a Merry Christmas.

Why Isn’t My Refund as Big as my Friends?



I get this question every year.  Why did my friend, neighbor, co-worker, relative, etc. get a bigger refund than I did?  And the honest answer to that question is:  I don’t know, I didn’t prepare their taxes.  But here are some common reasons why some people might get a bigger refund than you do.


1.  They withheld more.  That’s the simplest explanation.  Technically, you only get back if you overpaid your taxes.  So, people who withhold too much, get refunds.  If you get less, that actually means you win because you didn’t over withhold.  (But trust me, I know.  It really doesn’t feel like winning.)


2.  They qualified for the earned income tax credit.  EItC is one of those tax credits that you can actually receive even if you didn’t pay anything into the system.  But—there are many requirements—most notably you have to have earned income.  The EIC can make a huge difference in someone’s refund.


3.  College tax credits—the American Opportunity Credit can be worth up to $2,500 on someone’s tax return.  If your friend was attending school while you stayed home—that could be part of the difference also.


4.  Different filing statuses—if you’re single, you could be in a higher tax bracket than your married friend.  Or, if you’re married and your wife is also working—then you could be in a higher tax bracket than your single friend.  Even though two people have the same job and earn the same amount of money—their circumstances outside of work could have a huge impact on their tax refund.


5.  Different deductions—once again, it all has to do with things that happen outside of work.  A person renting an apartment could be paying higher taxes than someone paying a mortgage because of the mortgage interest deduction—or any number of other deductions.  There are just too many things to name.


6.  Income—The more money you make, the more tax you pay.  And people who make a lot of money have to pay the alternative minimum tax or AMT.


So, don’t waste your time worrying about your friend’s refund.  The important thing is to think about what your goals are.  Do you want a big refund?  If so, how big of a refund do you want and what would you do with it?


Or would you rather take home more money with each paycheck?  If so, what will you do with the extra take home pay?


But whether you choose a larger refund, choose larger take home pay, or maybe choose some middle ground; our job at Roberg Tax Solutions is to help you pay the least amount of tax while making smart decisions for yourself and your family.  As long as you’re doing what’s best for you, it really doesn’t matter what your friends are doing anyway now does it?

How to Do the Split Exemption When Preparing Your Own Return

Kids on the bus

Photo by roarpett on

I have another blog post about split exemptions.  If you’d like more information about that, or if you’d like to know if you should even be doing a split exemption, then you should read that first.  Here’s a link to that page:


This page is about the nuts and bolts of how to actually prepare a return with a split exemption.  I’ve gotten a lot of calls and emails asking me how it‘s done.  I’m using the software package that’s on this website for the example.  If you’re using Turbo Tax and have questions, call the 800 number on the box.  They have trained experts to talk you through it.  (Sorry, Turbo Tax doesn’t pay me so I can’t tell you how to use their product.)  If you need Turbo Tax help but don‘t have the box, go to this site and send them an email, they’ll contact you:


This is how it works in

If you are the custodial parent, claiming the head of household status and the EIC, this is what you do:


1.  First thing:  Once you log into the software, the very first question you get is what is your filing status.  You’re going to say Head of Household.


Then you’ll complete the rest of the form with your name and address information.


The next section is the dependents screen.  First it asks if someone can claim you as a dependent.  If you’re splitting an exemption, then the answer to this had better be “No.”


Do you have any dependents to claim:  Yes


Did you pay for the care of a child, etc:  Yes if you did, no if you didn’t.  When splitting an exemption, the custodial parent is the one who gets to claim the child care credit if your child is in daycare.


Go to the next page.


Now you’re on the forms review page.  Under dependents it says “add a form.”  Click on that.


On the dependent screen, you are going to fill out all the information about your child; the name, social security number, etc.  But in the check boxes below you are going to check the box that says:  “Child is not your dependent but does qualify you to file as Head of Household”.


The next section is for Child and Dependent Care Expenses—If you have those complete that section.


The next section is about EIC.  Answer those questions.  Generally the answers should be NO, NO, NO.  Question 13a—where it asks is someone else qualifies to claim this child?  Your ex cannot claim EIC—your ex is claiming the dependency exemption, so you should answer NO.


When you finish the screen, it will send you back to the dependents screen again.  If you have another child, you’ll add another form.  If you’re done, click next.


Then you’ll complete the rest of the program by inputting your wages and other income.


After you’ve input your income information, you’ll be inputting your deductions.


Then you’ll have the state information for your state return.


You’re almost done.  There are more questions you’ll need to answer before you finish.


When you get to the part where you “Review Your Return” you want to click on the “Preview Your Return” section.  This is where you check to make sure it’s right.  This is what to look for:

1.  Your filing status will be Head of Household, box 4

2.  In the line below it, it will have your child’s name and social security number

3.  In the exemptions section, it will show that you have claimed yourself; it will not show your        child’s name in that box at all

4.  On page 2 of your 1040 form there will be nothing on line 33, or line 39 (the child tax credits).

5.  On page 2, if you do qualify for EIC, then there will be something on line 38a.


If that’s how your return comes out, then you’ve done the split exemption correctly.


Note:  if you have other children that will not have split exemptions, then you will have names in the dependents screen and probably numbers in the child tax credits line.  You might want to do the split child first and check the return, then go back and add the other children.


If you are the parent claiming the exemption and the child tax credit, but not the head of household status and EIC—then here are your instructions.


1.  Starting from the beginning, you will first choose your filing status.  The split child cannot make your Head of Household so unless you have another child that lives with you; this is not your status.  You’ve going to be married or single.

2.  When you get into the dependents – dependents information, you will answer the questions,

Can someone else can claim you as a dependent?  No.

Do you have any dependents to claim:  Yes

Did you pay for the care of a child, etc:  No—even if you paid for the child care expenses, since you are not the custodial parent, you are not entitled to this tax credit?

3.  In the dependent screen, you will fill out all the information about your child, but the box you are going to check is “Child did NOT live with you due to divorce or separation.”  In the section that says “months lived with you” you will answer “zero.”  Even if your child did live with you for a few months, check zero here to make the program work.

4.  You will check NO under the child care expenses.

5.  In the EIC section you will check the box that says, “Dependent is not eligible for EIC.”

6.  Next you’ll complete the rest of the tax return like you would any other.

7.  When you get to the finish, you’ll want to check your return to make sure your child is listed correctly.

When you review your return, your filing status will be single (or married if you’ve remarried) but it will not be head of household.

You child’s name will be listed in the exemptions section.

You will have a number on one or both of the child tax credit lines.

You will not have anything listed on the EIC line.

If both parents file the split exemption correctly, you should have no problem with the IRS over claiming your child.

Filing Taxes While Going Through a Divorce

Divorce and taxes can be complicated


Going through a divorce is traumatic.  It’s sad.  And it’s a royal pain in the behind.  On top of all the emotional stuff you’re going through, it can also really mess up your taxes.


Let’s say that right now you and your ex are still married but living apart.  The divorce will be final this year, but you still need to file last year’s taxes.  What do you do?


Scenario One:  You’ve been apart and on your own with the children for over 6 months.

In this case, you are entitled to claim the head of household filing status, the children’s exemptions, EIC (if your income allows it) and the child care credit of your kids are in daycare. Basically you get everything.


Your ex would only be able to claim Married Filing Separately. That could really hurt him at tax time. That’s not your problem, just letting you know what his status is.


So—bottom line—if there’s a fight, you win. Be aware, that he’ll probably try to claim the kids anyway (I see that all the time.) Your refund could be delayed by 75 days. But, if he files first and you get rejected—don’t quit, you’re the winner.


Scenario 2:  Couples who did not split apart until the second half of the year.

If you lived with your spouse at all during the last six months of the year, then you’re not allowed to claim the Head of Household filing status.  Your only two options for your filing status are Married Filing Separate and Married Filing Jointly.  Until your divorce is final, you cannot claim Single.


If you file separately, you lose the Earned Income Tax Credit.  There are other deductions you can lose too, but the EIC is probably the most devastating to lower income taxpayers with children.


The incentive to file jointly in this scenario is much higher than if you’re allowed to claim head of household.


No matter which scenario you’re in, there’s another filing option:  Married filing jointly.


First, if your ex is abusive or dangerous to you or your children in any way—don’t go there, stop here and file head of household or Married Filing Separate. Never risk physical danger.


But, if your ex has some redeeming characteristics—think about it, you’ve probably got adorable kids.  He’s done something right somewhere along the line.  Remember, you’re going to be dealing with your kids’ father for the rest of their lives even if you’ve divorced him.  Mercy might be a good option for future family peace.


So, if you’re thinking about filing jointly, first, you prepare your own taxes, as HOH or MFS like above, claiming all of the exemptions you’re entitled to and figure out your refund.


Next, I recommend doing this at a tax place, not on your own—so that you give yourselves a “mediator”, figure what the refund, or tax situation would be if you two filed together.


Then you’re going to “split the refund”. That is, you set it up so that instead of getting one refund check to go into one bank account, you have the IRS send the refunds to your separate checking accounts (so you don’t have to rely on your ex to sign a check or give you money or anything like that.) You do that using the 8888 form.  Here’s a link:


BUT—and this is really important:  OKAY, I’M CAPITALIZING AND WRITING IT SEPARATELY BECAUSE IT’S REALLY IMPORTANT: You don’t have to split the refund evenly. You make sure that you get the full amount of what you’d get if you filed separately. That’s only fair. If you were the one that supported the kids, paid the rent, etc, especially if you would be allowed to claim head of household, then you should get the whole of that much of your refund.


You make sure that the refund is split the way it should be and don’t leave the tax place until you see that the return has been e-filed.  That way he can’t go back and change the dollar amounts.


Remember, you only file with the ex in order to keep him from totally tanking on his taxes because of the married filing separate classification.  This might not help him at all—in which case you don’t file jointly.


Sometimes, you don’t want to file jointly with a soon to be ex.  Here are some good reasons not to help the ex by filing jointly:


  • If he’s in some kind of tax trouble from before—keep away
  • If he owes on student loans or child support to a previous family—keep away
  • If he’s self employed—he’ll probably owe and is more likely to get audited—that’s a red flag, use your judgment. The EIC you’d get could be used to pay his self employment taxes and your refund probably wouldn’t be high enough to cover what you’d get by filing alone.  But if he’s a decent person—and not crooked, the financial benefit to him could be amazing.
  • If he’s crooked.  Seriously.  If you suspect that he has cheated on his taxes in the past, don’t risk having your name tied to his tax return.  Walk away.


Divorce isn’t easy on anybody.  Make sure you know your rights and what you’re entitled to and don’t be bullied into doing something that’s not legal or in your best interests.

Can I Claim EIC if I Don’t Have a Job?

EIC with no income

Raising a child is a big job, we just don’t get paid for it. In order to qualify for EIC, you need to have what the IRS considers to be “earned income” which comes from a paying job.



The short answer is no.  But I’ve had about 10 phone calls or emails this week with this question, or something similar anyway, so I figured I should post something about it so people will understand it better.


First, EIC stands for the Earned Income Credit (or some people call it EITC for Earned Income Tax Credit, they’re the same thing.)  The key phrase here is “Earned Income”.  You earn income from a job—like working at Target, or you might be self employed like me.  I own my business so I don’t get a W2 but I still earn income.


Social security, welfare, child support, food stamps, VA benefits, SSI, and gifts from friends or family—none of those count as earned income.  Neither does bank interest, stock sales or dividends, or rental income.  As far as the IRS is concerned, these things do not count as “earned income” for EIC.  (I know those Smith Barney commercials say they “earn” their income, but if you’re making money in a Smith Barney account—it doesn’t get you anything for EIC either.)


Alimony—does not count as earned income for EIC, but it does count as taxable income and can affect how much EIC you can get.  Don’t confuse child support with alimony.  Child support ends when your kids grow up.  Alimony lasts forever or has an end date that has nothing to do with children.  Most people get child support, alimony is pretty rare these days.


So if you have a job that gives you a W2—you’re set because the W2 proves your income.   But if you’re self employed—proving your income is harder.


The IRS is demanding that tax preparers have proof of your self-employment income before we can file your EIC tax return.  We’ll be fined  for not having proper information.  So if you don’t have good records of your income,  you might get turned away by your tax preparer.


So the obvious question is—what records do you need to prove your income?  The IRS has a list that includes the following:  a business license, 1099MISC forms, records of gross receipts, income summary, expense summary, and bank statements.


The 1099MISC is really the best proof of income if you receive those.  1099MISC is given to anyone performing work for a small business that got paid over $600 during the year.  If you’re like me, you don’t get 1099MISC forms.  Most of the work I do is for individual people, not businesses so I need to prove my income another way.  But I’m an accountant—I have all the bank statements and business records and a license to back up my income.  It’s what I do for a living.  Not everyone is going to have my kind of records.


What do you do if you just clean Mrs. Jones’ house for $50 a week?  Or, maybe you helped paint Mr. Anderson’s garage for $200 last spring.  It’s all cash, you’re just helping out.  Those don’t seem like they’re really jobs but they are.  If Mrs. Jones gives you $50 a week for the whole year, then that’s $2,600.  Add Mr. Anderson’s $200 and you’ve got $2800.  It’s not much but it’s something.


If you’ve been doing odd jobs like that, you’ll need to get some kind of documentation.  Put it in writing and have the people you worked for sign it.  In the future, you should keep a log of every place you work:  the date, the location, the person you worked for, and the type of work you did.


You can’t make stuff up!  That’s illegal.  And remember, EIC returns with self-employment are an audit target—if you lie about this stuff there’s a really good chance that you’ll get caught.


But, if you really did work and you really do deserve to claim EIC, then you should be claiming it.  You just need to make sure that you’ve got your documentation in order so you can prove it.


The IRS has a website full of information about EIC.  Check it out:  EIC Home Page

What’s New with the Earned Income Tax Credit? You Need to Know This

If you usually claim the Earned Income Tax Credit (EIC) then you need to know about the new rules.  Although the dollar amounts of the EIC have remained the same, the reporting requirements have changed dramatically.  If you have your taxes done by a professional—then you need to be prepared for the additional paperwork.


So what’s different?  It’s the new page 4 of Form 8867—Paid Preparer’s Earned Income Credit Checklist (  That’s the form that tax preparers have to fill out and send in along with your tax return.  The quick and dirty summary is:  if a tax preparer doesn’t ask enough questions and fails to get enough information before submitting your EIC tax return, she’ll be subject to a $500 fine.  Ouch.  That’s $500 per tax return.  A few bad tax returns can put your tax preparer out of business.


So what’s on this page 4?  Well the first item is proving that the child you’re claiming EIC for really lives with you.  Here’s what you can use to prove your child lives with you:


  • School records or statement
  • Landlord or property management statement
  • Health care provider statement
  • Medical records
  • Child care provider records
  • Placement agency statement
  • Social service records or statement
  • Place of worship statement
  • Indian tribal official statement
  • Employer statement


You don’t need to have all of these things, but you’ll need at least one thing to show your child lives in your house.  The school records are probably the easiest if your child is of school age.   For me, as a tax preparer, I would accept your child’s last semester report card as evidence of residency as long as the report card has your home address on it.


If you are claiming a disabled child, you’ll need to prove the disability.  Here are the documents for that:


  • Doctor statement
  • Other health care provider statement
  • Social services agency or program statement


So with a disability, you have a double issue—proving residence and the disability.  Although to be quite honest, I suspect that these statements would also include a home address on them and serve a duel purpose.


And if you’re self-employed, you’re going to need to prove you really have some sort of business with the following records:


  • Business license
  • 1099MISC forms
  • Records of gross receipts
  • Income summary
  • Expense summary
  • Bank statements


These records are pretty standard for anyone who is self employed anyway so this shouldn’t be a burden.   Bottom line here is—if you have a business, you need to run it like a business and keep proper business records.


In addition to the new paperwork requirements, of course you’re still going to have to show you and your children’s social security cards.  Also, if you’re getting a bank product (where you pay for your tax preparation out of your refund) you’ll need to have a driver’s license or state ID card with your correct current address on it.


The IRS has already announced that people can expect their refunds to be delayed this year.  For the fastest possible refund, you want to make sure that you’ve got all of your paperwork together before you even head to the tax office.


Be sure to check out to answer any EITC questions you may have.  Or call us and we would love to help.