Earned Income Credit-a discussion

hollyg1920 · January 2012

Ladies,

what are your thoughts about the EIC? I benefited from it for 5 years when I was a single working mom. I did use some of the funds to treat my son and myself to a vacation and we put money in savings and paid bills.

My niece is going to allow her ex to claim their child (since she doesnt work) as long as he splits the refund with her. he has another child that he also claims and from what she told me...he made $20,000 this past year and is getting a refund of $7,500. Last year she went to panama for spring break and got a flat screen for her apt.

I am assuming his tax liability before claiming the kids was under $1000.

What are your thoughts on the EIC?

I will frame this and say...I consider myself liberal and very supportive of social programs because I can speak from experience...they do help people (myself included) and I feel a bit of bias here because I see my niece abusing the system (sec 8, EIC, etc)

PrincessFiona9 · January 2012

I thank baby Jesus for the EIC every year. It's the only way I can pay off DD's pedi bills and other things like much needed car repairs etc. The rest goes toward bills, a few splurges like clothes shopping, and savings.

hydies33 · January 2012

ItsAllGravy7:
I don't see how Tax Refunds are abusing the system? You can only get "refunded" taxes that you've paid throughout the year. You get tax credits based on certain circumstances so if you flat out LIE about those circumstances then yes you're abusing the system but claiming income tax and children isn't abuse is it??? I feel like maybe there's something I'm missing.

I was thinking the same thing. It might not be wise to spend the money on vacations and flat screens, but it's not unethical or wrong unless I'm missing something....

hollyg1920 · January 2012

ItsAllGravy7:
I don't see how Tax Refunds are abusing the system? You can only get "refunded" taxes that you've paid throughout the year. You get tax credits based on certain circumstances so if you flat out LIE about those circumstances then yes you're abusing the system but claiming income tax and children isn't abuse is it??? I feel like maybe there's something I'm missing.

So if he made 20,000 and paid $1000 in federal income taxes and he can claim head of household and 2 children under 16 he will get a refund of $7500 which is $6500 more than he paid in taxes for the year.

I think they are abusing the system because she lets him claim their son so she can get some tax money from him because she does not work.

CoffeeIsMyFriend · January 2012

Is it smart to go on vacations or buy fancy electronics with returns when you have children and a low income? No. But then again the world is filled with a lot of dumb people, so I can't say I'd be surprised when I hear stories like the one of your sis and her baby daddy.

hollyg1920 · January 2012

hydies33:
ItsAllGravy7:
I don't see how Tax Refunds are abusing the system? You can only get "refunded" taxes that you've paid throughout the year. You get tax credits based on certain circumstances so if you flat out LIE about those circumstances then yes you're abusing the system but claiming income tax and children isn't abuse is it??? I feel like maybe there's something I'm missing.
I was thinking the same thing. It might not be wise to spend the money on vacations and flat screens, but it's not unethical or wrong unless I'm missing something....

I don't care how people spend the money (just like i dont think people should be told how to spend their food stamps....poor people should be able to enjoy skittles and twinkies)

I am just wondering if EIC still works overall...should a person be able to get a refund for all the taxes they paid and then several thousand beyond that?

scoutkate · January 2012

It's only abusing the system if he's lying to the IRS about their son being a qualifying child for the EIC.

hollyg1920 · January 2012

GhostMonkey:
hollyg1920:

ItsAllGravy7:
I don't see how Tax Refunds are abusing the system? You can only get "refunded" taxes that you've paid throughout the year. You get tax credits based on certain circumstances so if you flat out LIE about those circumstances then yes you're abusing the system but claiming income tax and children isn't abuse is it??? I feel like maybe there's something I'm missing.

So if he made 20,000 and paid $1000 in federal income taxes and he can claim head of household and 2 children under 16 he will get a refund of $7500 which is $6500 more than he paid in taxes for the year.

I think they are abusing the system because she lets him claim their son so she can get some tax money from him because she does not work.

How is this abusing the system exactly? She didn't work, so won't be filing. He did, and there is an otherwise unclaimed dependant. I disagree with their choices on how they used the money, but I don't see this as abusing the system.

Why is she the only one that could claim the kid? Because he lived in her for 9 months? Fathers are allowed to claim their children too.

He only sees their son once a month or so for a weekend and for EIC the child must reside in the home of the person claiming them at least 50% of the year.

I agree dads should be able to claim their kids too. Most people I know alternate years in claiming the kids.

I shouldn't have used my niece as an example because she frustrates me with the choices she makes. I should have just asked the general question about EIC-should the refund be more than what is paid in taxes for the year?

jlthompson19 · January 2012

It's not abusing the system, it's a screwed up system.

It's his child and as long as they aren't multiple people trying to claim him, it's his right to.

Now, I don't agree with getting more money back than you paid in, but again, that's the systems fault, not his.

ETA: I have no idea how the EIC works, so I didn't realize there were rules on who can claim a child based on their living situation. That is abuse, IMO.

emilydholmes1 · January 2012

jlthompson19:
It's not abusing the system, it's a screwed up system.

It's his child and as long as they aren't multiple people trying to claim him, it's his right to.

Now, I don't agree with getting more money back than you paid in, but again, that's the systems fault, not his.

I agree with this.

scoutkate · January 2012

GhostMonkey:
hollyg1920:

ItsAllGravy7:
I don't see how Tax Refunds are abusing the system? You can only get "refunded" taxes that you've paid throughout the year. You get tax credits based on certain circumstances so if you flat out LIE about those circumstances then yes you're abusing the system but claiming income tax and children isn't abuse is it??? I feel like maybe there's something I'm missing.

So if he made 20,000 and paid $1000 in federal income taxes and he can claim head of household and 2 children under 16 he will get a refund of $7500 which is $6500 more than he paid in taxes for the year.

I think they are abusing the system because she lets him claim their son so she can get some tax money from him because she does not work.

How is this abusing the system exactly? She didn't work, so won't be filing. He did, and there is an otherwise unclaimed dependant. I disagree with their choices on how they used the money, but I don't see this as abusing the system.

Why is she the only one that could claim the kid? Because he lived in her for 9 months? Fathers are allowed to claim their children too.

The dad can certainly claim him as a dependant, but I *think* he can only claim him as a qualifying child for the EIC if, among other things, the child lived with him for more than half the year. If he tells the IRS the kid lived with him more than half the year when he really didn't, I'd say that's abusing the system.

I may be wrong, though.

ETA: The rules for claiming a dependent and claiming a qualifying child for EIC are different. A child who qualifies for as a dependent may not qualify for EIC.

missymo · January 2012

Everyone seems to know someone who takes advantage of the system. There will always be people like that. But while we castigate the poor for this, the rich do it just as often. Every tax bracket has folks who take advantage of loop holes to get bigger credits or avoid paying their share.

The only real way to police this is an Audit - which the government performs. It's simply not possible to catch everyone. I wish people wouldn't focus so much on the few families they know that take advantage, and instead think about all the people they may know that benefit.

numeria11 · January 2012

Here's the thing EIC is intented to make it possible for the working poor to at least have an incentive to work. Would you rather pay someone 7k a year in tax refunds so that they continue working or have them not work and just live on public aid and pay that 20k that they were at least earning while doing something useful before? Because in many cases without an EIC credit these folks really would be better off not working because they could claim more public aid since they are barely making it by as it is.

Yeah it sucks when people dont use it in the best way possible but who am I to say you cant have a nice TV or ever take a vacation? Yeah it would be great if it went towards savings but some people are going to splurge just like many of us on here are planning to do with our returns.

tyke29 · January 2012

I personally think that you should not get a refund for more than you paid into the system. That extra money should be used for programs that truely help the poor. More funds for daycare credits, food programs, utility assitance, medical programs, etc. That way no one would be going on vacation with money they did not pay into the system.

Just my 2 cents.

jlthompson19 · January 2012

missymo:

Everyone seems to know someone who takes advantage of the system. There will always be people like that. But while we castigate the poor for this, the rich do it just as often. Every tax bracket has folks who take advantage of loop holes to get bigger credits or avoid paying their share.

The only real way to police this is an Audit - which the government performs. It's simply not possible to catch everyone. I wish people wouldn't focus so much on the few families they know that take advantage, and instead think about all the people they may know that benefit.

I like this. Let's stop bitching about the people barely making over the poverty level trying to get a few extra grand and start bitching about how someone who raked in $43 million only had a tax rate of 14%. Not that he was abusing the system, he worked it to his advantage, as we all do, but let's let the poor have SOME luxury in their life rather than berating them every.single.day.

zeptattoo · January 2012

I don't think it is abuse. I think there is a flaw and they are taking advantage of it, but as long as they are not lying, then I see no issue.

ZoeyMarie · January 2012

EllaHella:
I am still failing to see the abuse. I think they are maximizing their tax credits and deductions. Who doesn't do that?

The abuse, from what I see, is that the child does not live the required 50% of the year with the parent who is claiming him on their taxes.

hollyg1920 · January 2012

LOL

Thank you everyone for helping me gain perspective. She called me this morning and after we talked I was just like Tongue Tied

I grew up on welfare, I needed welfare as a single mom and if it was not for child care assistance, EIC...I would not have been able to get my master's degree. I can also tell you how the system is broke....I had to turn down a raise of 50 cents because I would have lost child care assistance....losing $300 in subsidy for $80 more a month...wth

greengirl0909 · January 2012

I'm opposed to the EIC. I think it's a flaw in our tax system.

smithpaint · January 2012

zeptattoo:
I don't think it is abuse. I think there is a flaw and they are taking advantage of it, but as long as they are not lying, then I see no issue.

I agree with this. I think the system is flawed, and I would love to see it changed. However, for now it's okay to get back 6500 that you didn't even pay in to the IRS because of EIC.

[Deleted User] · January 2012

ItsAllGravy7:
smithpaint:
zeptattoo:
I don't think it is abuse. I think there is a flaw and they are taking advantage of it, but as long as they are not lying, then I see no issue.
I agree with this. I think the system is flawed, and I would love to see it changed. However, for now it's okay to get back 6500 that you didn't even pay in to the IRS because of EIC.

Would you, instead, encourage their employers to pay them more than a measly fuckings 20k a year??? Like say, 25K a year instead of 20K + 5K EIC??

I think you all are overestimating the benefit of the EIC...you have to make a extremely low income to qualify for the FULL benefit of the EIC and it phases out depending on your income and how many children you have. It is NOT that large of a benefit for people who work for very little pay and have children to take care of.

Srsly. Do any of you comprehend that $20k per year is only $1666 per month BEFORE taxes. That pays for rent, food, transportation, insurance, diapers, childcare, and skittles. That's not very much, and I think you have to buy the remnant skittles that are defective.

Granted, the person making that little may not be working full time, but that's kind of not the point at all. Maybe everyone here could tell us, in detail, just how they would make it on $1600 per month?

Rach21 · January 2012

EllaHella:
ZoeyMarie:

EllaHella:
I am still failing to see the abuse. I think they are maximizing their tax credits and deductions. Who doesn't do that?
The abuse, from what I see, is that the child does not live the required 50% of the year with the parent who is claiming him on their taxes.
I did miss that part. That would be lying.

WOW, look what I found. https://www.irs.gov/publications/p596/ch02.html

Special rule for divorced or separated parents or parents who live apart. A child will be treated as the qualifying child of his or her noncustodial parent (for purposes of claiming an exemption and the child tax credit, but not for the EIC) if all of the following apply.The parents:Are divorced or legally separated under a decree of divorce or separate maintenance,Are separated under a written separation agreement, orLived apart at all times during the last 6 months of 2010, whether or not they are or were married.The child received over half of his or her support for the year from the parents.The child is in the custody of one or both parents for more than half of 2010.Either of the following statements is true.The custodial parent signs Form 8332 or a substantially similar statement that he or she will not claim the child as a dependent for the year, and the noncustodial parent attaches the form or statement to his or her return. If the divorce decree or separation agreement went into effect after 1984 and before 2009, the noncustodial parent may be able to attach certain pages from the decree or agreement instead of Form 8332.A pre-1985 decree of divorce or separate maintenance or written separation agreement that applies to 2010 provides that the noncustodial parent can claim the child as a dependent, and the noncustodial parent provides at least $600 for support of the child during 2010.

So the dude is within his rights, apparently, even if his kid didn't live with him for all of the year. GI Joe was right: KNOWING IS HALF THE BATTLE.

scoutkate · January 2012

Rach21:
EllaHella:
ZoeyMarie:

EllaHella:
I am still failing to see the abuse. I think they are maximizing their tax credits and deductions. Who doesn't do that?

The abuse, from what I see, is that the child does not live the required 50% of the year with the parent who is claiming him on their taxes.

I did miss that part. That would be lying.

WOW, look what I found. https://www.irs.gov/publications/p596/ch02.html
Special rule for divorced or separated parents or parents who live apart. A child will be treated as the qualifying child of his or her noncustodial parent (for purposes of claiming an exemption and the child tax credit, but not for the EIC) if all of the following apply. The parents: Are divorced or legally separated under a decree of divorce or separate maintenance, Are separated under a written separation agreement, or Lived apart at all times during the last 6 months of 2010, whether or not they are or were married.

The child received over half of his or her support for the year from the parents.

The child is in the custody of one or both parents for more than half of 2010.

Either of the following statements is true.

The custodial parent signs Form 8332 or a substantially similar statement that he or she will not claim the child as a dependent for the year, and the noncustodial parent attaches the form or statement to his or her return. If the divorce decree or separation agreement went into effect after 1984 and before 2009, the noncustodial parent may be able to attach certain pages from the decree or agreement instead of Form 8332.

A pre-1985 decree of divorce or separate maintenance or written separation agreement that applies to 2010 provides that the noncustodial parent can claim the child as a dependent, and the noncustodial parent provides at least $600 for support of the child during 2010.

So the dude is within his rights, apparently, even if his kid didn't live with him for all of the year. GI Joe was right: KNOWING IS HALF THE BATTLE.

Wrong. See bolded.

Which is exactly what I tried to explain earlier.

Rach21 · January 2012

scoutkate:
Rach21:
EllaHella:
ZoeyMarie:

EllaHella:
I am still failing to see the abuse. I think they are maximizing their tax credits and deductions. Who doesn't do that?
The abuse, from what I see, is that the child does not live the required 50% of the year with the parent who is claiming him on their taxes.
I did miss that part. That would be lying.
WOW, look what I found. https://www.irs.gov/publications/p596/ch02.html
Special rule for divorced or separated parents or parents who live apart. A child will be treated as the qualifying child of his or her noncustodial parent (for purposes of claiming an exemption and the child tax credit, but not for the EIC) if all of the following apply. The parents:Are divorced or legally separated under a decree of divorce or separate maintenance,Are separated under a written separation agreement, orLived apart at all times during the last 6 months of 2010, whether or not they are or were married.
The child received over half of his or her support for the year from the parents.
The child is in the custody of one or both parents for more than half of 2010.
Either of the following statements is true.
The custodial parent signs Form 8332 or a substantially similar statement that he or she will not claim the child as a dependent for the year, and the noncustodial parent attaches the form or statement to his or her return. If the divorce decree or separation agreement went into effect after 1984 and before 2009, the noncustodial parent may be able to attach certain pages from the decree or agreement instead of Form 8332.
A pre-1985 decree of divorce or separate maintenance or written separation agreement that applies to 2010 provides that the noncustodial parent can claim the child as a dependent, and the noncustodial parent provides at least $600 for support of the child during 2010.
So the dude is within his rights, apparently, even if his kid didn't live with him for all of the year. GI Joe was right: KNOWING IS HALF THE BATTLE.

Wrong. See bolded.

Which is exactly what I tried to explain earlier.

OH I see. Well, how does the OP know that the dad is applying for the EIC and not just the child tax credit? We use a computer tax software and it always walks you through the EIC, and usually it comes back with a "you do not earn an EIC" (we haven't so far) or what have you. Maybe he puts it all in the computer but it doesn't actually GIVE him the EIC, but just the child tax credit and he isn't aware of the difference?

scoutkate · January 2012

Rach21:
scoutkate:
Rach21:
EllaHella:
ZoeyMarie:

EllaHella:
I am still failing to see the abuse. I think they are maximizing their tax credits and deductions. Who doesn't do that?

The abuse, from what I see, is that the child does not live the required 50% of the year with the parent who is claiming him on their taxes.

I did miss that part. That would be lying.

WOW, look what I found. https://www.irs.gov/publications/p596/ch02.html
Special rule for divorced or separated parents or parents who live apart. A child will be treated as the qualifying child of his or her noncustodial parent (for purposes of claiming an exemption and the child tax credit, but not for the EIC) if all of the following apply. The parents: Are divorced or legally separated under a decree of divorce or separate maintenance, Are separated under a written separation agreement, or Lived apart at all times during the last 6 months of 2010, whether or not they are or were married.

The child received over half of his or her support for the year from the parents.

The child is in the custody of one or both parents for more than half of 2010.

Either of the following statements is true.

The custodial parent signs Form 8332 or a substantially similar statement that he or she will not claim the child as a dependent for the year, and the noncustodial parent attaches the form or statement to his or her return. If the divorce decree or separation agreement went into effect after 1984 and before 2009, the noncustodial parent may be able to attach certain pages from the decree or agreement instead of Form 8332.

A pre-1985 decree of divorce or separate maintenance or written separation agreement that applies to 2010 provides that the noncustodial parent can claim the child as a dependent, and the noncustodial parent provides at least $600 for support of the child during 2010.

So the dude is within his rights, apparently, even if his kid didn't live with him for all of the year. GI Joe was right: KNOWING IS HALF THE BATTLE.

Wrong. See bolded.

Which is exactly what I tried to explain earlier.

OH I see. Well, how does the OP know that the dad is applying for the EIC and not just the child tax credit? We use a computer tax software and it always walks you through the EIC, and usually it comes back with a "you do not earn an EIC" (we haven't so far) or what have you. Maybe he puts it all in the computer but it doesn't actually GIVE him the EIC, but just the child tax credit and he isn't aware of the difference?

Eh, I don't know and I don't really care. I'm just making the point that, if circumstances are truly the way OP reports them to be, her neice's father is indeed abusing the system.

hollyg1920 · January 2012

Rach21:
scoutkate:
Rach21:
EllaHella:
ZoeyMarie:

EllaHella:
I am still failing to see the abuse. I think they are maximizing their tax credits and deductions. Who doesn't do that?
The abuse, from what I see, is that the child does not live the required 50% of the year with the parent who is claiming him on their taxes.
I did miss that part. That would be lying.
WOW, look what I found. https://www.irs.gov/publications/p596/ch02.html
Special rule for divorced or separated parents or parents who live apart. A child will be treated as the qualifying child of his or her noncustodial parent (for purposes of claiming an exemption and the child tax credit, but not for the EIC) if all of the following apply. The parents:Are divorced or legally separated under a decree of divorce or separate maintenance,Are separated under a written separation agreement, orLived apart at all times during the last 6 months of 2010, whether or not they are or were married.
The child received over half of his or her support for the year from the parents.
The child is in the custody of one or both parents for more than half of 2010.
Either of the following statements is true.
The custodial parent signs Form 8332 or a substantially similar statement that he or she will not claim the child as a dependent for the year, and the noncustodial parent attaches the form or statement to his or her return. If the divorce decree or separation agreement went into effect after 1984 and before 2009, the noncustodial parent may be able to attach certain pages from the decree or agreement instead of Form 8332.
A pre-1985 decree of divorce or separate maintenance or written separation agreement that applies to 2010 provides that the noncustodial parent can claim the child as a dependent, and the noncustodial parent provides at least $600 for support of the child during 2010.
So the dude is within his rights, apparently, even if his kid didn't live with him for all of the year. GI Joe was right: KNOWING IS HALF THE BATTLE.

Wrong. See bolded.

Which is exactly what I tried to explain earlier.

OH I see. Well, how does the OP know that the dad is applying for the EIC and not just the child tax credit? We use a computer tax software and it always walks you through the EIC, and usually it comes back with a "you do not earn an EIC" (we haven't so far) or what have you. Maybe he puts it all in the computer but it doesn't actually GIVE him the EIC, but just the child tax credit and he isn't aware of the difference?

I know because they tell me everything and she told me exactly how much of a refund he is getting and how much he has to give to her because she let him claim their son. The child tax credit is 1000/per child that would not equate him getting a 7500 refund...he is getting the EIC for 2 kids who do not live with him 50% or more of the time.

I hope people do not think this is a "no skittles for poor people" post. It was not my intent....I am just frustrated they are lying to the gov't in order to get a fat refund.

I am not against the EIC, I used to get it myself, but I think 7500 for a refund is crazy especially when lying to get it is involved.

I would love to see minimum wage double so there were actually jobs with a living wage, I would love to see more money invested in medicaid and child care subsidy programs.

Kitiara5512 · January 2012

hollyg1920:

ItsAllGravy7:
I don't see how Tax Refunds are abusing the system? You can only get "refunded" taxes that you've paid throughout the year. You get tax credits based on certain circumstances so if you flat out LIE about those circumstances then yes you're abusing the system but claiming income tax and children isn't abuse is it??? I feel like maybe there's something I'm missing.

So if he made 20,000 and paid $1000 in federal income taxes and he can claim head of household and 2 children under 16 he will get a refund of $7500 which is $6500 more than he paid in taxes for the year.

I think they are abusing the system because she lets him claim their son so she can get some tax money from him because she does not work.

If she is not working but has primary custody of their child, I think she would get some tax refund back anyway, right? My friend who just married, she was a single mom and a couple of years she only earned like less than $2000, but she got back like $3500 for her refund.

chardonnay24 · January 2012

You can't just "let" someone claim a person they are not entitled to claim. He may be eligible to claim the child and get the dependency exemption if she signs a form releasing the exemption, but he will not be eligible to claim EIC unless the child lived with him for more than half the year, which he'd need proof of. EIC is very heavily audited so he could certainly lie but there is a high liklihood of getting caught, especially since your niece has claimed the child in the past.

There will always be people that cheat the system but you should be angry at the person, not the system. Overall, I think EIC is beneficial and should continue.

scoutkate · January 2012

mbenit4:
scoutkate:
GhostMonkey:
hollyg1920:

ItsAllGravy7:
I don't see how Tax Refunds are abusing the system? You can only get "refunded" taxes that you've paid throughout the year. You get tax credits based on certain circumstances so if you flat out LIE about those circumstances then yes you're abusing the system but claiming income tax and children isn't abuse is it??? I feel like maybe there's something I'm missing.

So if he made 20,000 and paid $1000 in federal income taxes and he can claim head of household and 2 children under 16 he will get a refund of $7500 which is $6500 more than he paid in taxes for the year.

I think they are abusing the system because she lets him claim their son so she can get some tax money from him because she does not work.

How is this abusing the system exactly? She didn't work, so won't be filing. He did, and there is an otherwise unclaimed dependant. I disagree with their choices on how they used the money, but I don't see this as abusing the system.

Why is she the only one that could claim the kid? Because he lived in her for 9 months? Fathers are allowed to claim their children too.

The dad can certainly claim him as a dependant, but I *think* he can only claim him as a qualifying child for the EIC if, among other things, the child lived with him for more than half the year. If he tells the IRS the kid lived with him more than half the year when he really didn't, I'd say that's abusing the system.

I may be wrong, though.

ETA: The rules for claiming a dependent and claiming a qualifying child for EIC are different. A child who qualifies for as a dependent may not qualify for EIC.

If she gives him permission to claim the child even though the child did not live with him most of the year, he is not doing anything wrong. Last year, I gave my son's father permission to claim him despite him living with me the majority. I called the IRS about it. You can go on their site and chat with someone too about it.

Even if she gives him permission, he cannot claim the child for the EIC. Claiming a child for the EIC is not the same thing as claiming a child as a dependent or for the child tax credit.

This comes straight from the IRS, folks:

Earned Income Credit (EIC)

The EIC is a refundable tax credit for low to-moderate-income taxpayers. ? A non-custodial parent can not claim EIC for a child that he or she has been given permission to claim as a dependent by a custodial parent. ? The IRS will request documentation such as school records, birth certificates or medical records to verify eligibility of a child claimed by more than one taxpayer. ? You may still be able to claim the credit, even if you do not have a qualifying child. See the rules and income limits in Publication 17 or Publication 596 for more information. https://www.irs.gov/pub/irs-pdf/p4449.pdf

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