Did you claim the Earned Income Tax Credit (EITC) on your 2014 tax return? If so, be sure to check your mail: the Internal Revenue Service (IRS) may want to hear from you.
The IRS has announced that they are sending letters to some taxpayers who may not be entitled to some or all of the EITC that was claimed on their 2014 income tax return. Taxpayers will receive a letter 5621, a letter 5621-A, or both, depending on the questions IRS may have about the return.
Letter 5621 (downloads as a pdf) indicates that IRS has a question about whether all of the children claimed on the return may not meet the qualifying child rules for the credit. It begins:
Our records show that you may not be entitled to some or all of the EITC claimed on the 2014 return you filed. We’re sending you this letter so you can make sure the children you claimed for the EITC on your 2014 tax return are qualifying children for the credit.
The following must be true for each child used to claim the EITC on your return:
- The child is related to you
- The child met the age requirement
- The child lived with you
With letter 5621-A (downloads as a pdf), IRS has a question about whether all the income and expenses reported from self-employment on Schedule C or Schedule C-EZ are complete and correct. It begins:
To report self-employment income as earned income for the Earned Income Tax Credit (EITC), you must carry on a trade or business with a profit motive or receive taxable compensation for performing services on a part-time basis and you must report all your income and expenses.
That’s right: the IRS expects you to make money in a trade or business. You must report all of your income and related expenses from the trade or business on your Schedule C – this includes income from all sources, including credit card and Paypal receipts which may be reported on a form 1099-K.
If you receive one or both of these letters, be sure and review your 2014 tax return for accuracy. If it’s correct, you don’t need to do anything. But if there’s an error, you will need to file an amended tax return. To file an amended return, use form 1040X, Amended U.S. Individual Income Tax Return (downloads as a pdf).
