发信人: floe (gadfly), 信区: TAX
标 题: Answer to one EIC eligibility question
发信站: BBS 未名空间站 (Wed Apr 5 11:42:57 2006)

Got some help from this board. So thought I'd share this with others. I
actually asked the question here but got no answer. It only applies to
resident alien filers still entitled to the tax treaty benefit.

I had this uncertainty about my EIC eligibility caused by the $5000 tax treaty
benefit. My W-2 form (box 1) doesn't include this $5000, which makes my
income fall in the EIC eligibility range. Yet if I add $5000 back to W-2
figure, it's over the threshold and disqualifies me for EIC. I took the time
to email IRS and the got the following reply.

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AS you probably know when figuring the Earned Income Tax Credit you
calculate it on both earned income and adjusted gross income, and then
take the smallest.
However if the $5,000.00 is exempt from U.S. Tax, due to a tax treaty,
and not included in your income for 2005 it would not be included in
your earned income.
----------------------------------

According to the reply, the $5000 shouldn't be counted as earned income.
However, if your $5000 was included in W-2 instead of 1042-S, I don't know how
you should handle it. I understand you can take it off from your adjusted
gross income (AGI) by filing an 8833. But according to the worksheet in 2005
Form 1040 instructions (page 47) and Worksheet A on page 49, you have to use
the number shown on W-2 even if it unfairly includes the $5000 tax treaty
benefit. In other words, if your $5000 is on W-2, you are screwed for EIC
purposes.

EIC has quite a few requirements. The one I'm talking about here is only one
of them. So you have to make sure you meet all other requirements, for
example, age over 25.

Hope this helps.
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