"Gary Bode has just completed our tax returns for the first time and I am totally satisfied with his level of service. He has been very attentive, asked all the right questions, and not only fixed some problems from our previous accountant, but also set us up for future success through a thorough and professional analysis of our corporate structure in conjunction with several personal variables.
Gary Bode, CPA: filing for the Earned Income Tax Credit becomes even more complicated if you’ve been disallowed! For a free phone consult call 399-2705.
Earned Income Tax Credit CPAs understand how financially devastating an IRS disallowance is. Disallowance means receiving less refund than expected. Or even no refund - a tough financial break, especially in a recession. The first step after EITC disallowance is, of course, to challenge it when justified. The next step is claiming the EITC in future years; this includes preparing Form 8862.
Hi, I’m Gary Bode, an EITC CPA who deals with EIC dissallowance and Form 8862. Our virtual office provides great service to you regardless of where you live.
I think most Earned Income Tax Credit CPAs agree that EIC disallowance happens most often with self-prepared tax returns. So, I suggest doing your homework, or, hiring a qualified professional like a CPA or enrolled agent. Specifically, I don’t recommend using a tax chain preparer! Use TurboTax to self prepare instead. Start by reading IRS Publication 967. Consider calling us if you run into trouble.
Challenging an EITC Disallowance
The IRS allows a taxpayer to challenge a disallowance by submitting additional documentation. Note that challenging the disallowance does not require preparation of Form 8862, although the information about qualifying children is the same. Form 8862 is generally required only when your CPA applies for the EITC in future years after you’ve had a past disallowance.
“Disallowance affects your current earned income tax credit, up to $5,571(!) as well as your right to apply for the EITC in future years.”
- Gary Bode, disallowance and Form 8862 CPA
Many Folks don’t file for the EITC, even though they Qualify
Earned Income Tax Credit CPAs are sometimes told, by the client, not to file for it. But more often, self-preparing taxpayers miss the opportunity because they simply don’t know about it.
Why did the EITC Disallowance take so Long?
The IRS doesn’t assume everyone is honest. But they don’t punish all taxpayers, by refunding late, to protect themselves against a few dishonest tax returns. Another example of IRS humanity! I’m not kidding. Refunding first, and disallowing later, means they’re willing to do extra work and take some public relations heat.
Why are Fees so High for Tax Preparation for the EITC and EITC Disallowance?
Well, the national tax chains are high and I think this is the source of that myth. I worked for a national chain, before I was a CPA, and I felt their pricing for EITC preparation was predatory. But now, in 2013, there is increased liability from the IRS for EITC tax preparers, like stiff fines and even loss of licensure. EITC CPAs now must file Form 8867 with the tax return, to prove we asked you all the right questions. So the extra work of documenting the EITC to IRS standards and preparing additional forms incur fees.
Form 8862, Information to Claim Earned Income Credit after Disallowance
Generally, your CPA must file Form 8862 with your tax return, if you’re claiming the EITC and have been disallowed in a previous year. There are exceptions of course. The entire EITC process is complex.
We’re an Earned Income Tax Credit CPA firm that deals with EIC disallowance and prepares Form 8862 when required. Our virtual office allows us to offer excellent service to long distance clients. Read any of the hundreds of posts on this website to get a feel for our ability and proactive attitude. For a free phone consult, please call (910) 399-2705.
I had a question if you could answer it for me asap. I was wondering is it true, if you know, if the IRS has to review a 8862 form manually? Last year i was given the run around by having to prove that my children live with me and are mine. I just hope I don’t run into the same thing this year. Is reviewing “processing” and an audit the same because thats what its saying when I where’s check my refund.
Hi Tanya, I don’t know what the IRS does. But it appears to me Form 8862 is hand processed. So there’s a delay but I haven’t heard complaints about anything other than the time line.
Hi Gary, I had a question about your reply… So you are saying that if you included a 8862 form in your tax preperations that the IRS hand processes these returns, and that is what causes a delay? Also do you know what happens if you submit this form but were not required to do so for the current tax year?
Basicly I was required to submit the form for the 2011 tax season, and got my refund and credit with no problem. This year the form was left in my paper work from last year and the person who prepared my taxes insisted that we resubmit it this year even though it was not a requirement.
Hi Tiffany: I would have sent Form 8862 as well. I don’t work for the IRS but I suspect that once Form 8862 is required, your future returns receive more scrutiny, whether you include Form 8862 or not. So sending Form 8862 probably isn’t the issue.
Hi I have been working on back taxes with the IRS and getting very conflicting Information with their reps that have been “helping” me. I was givin a deadline to file for 2010 and 2011 I was disallowed in 2004 and never given a straight answer as to why. When I disputed it I provided all documentation they asked for. I kept calling back and was never given a straight answer I just gave up and quit filing my taxes. So this year I decided to call them up bite the bullet and just pay the money they say I owe and move on. I was given 3 weeks to file for 2010 and 2011. I was told mail them separately but only put form 8862 with 2010 the earliest year filed. I did that however they claim I was missing documents from 2010 so I resent what they asked for sent it registered mail. This caused a delay. My 2011 taxes were processed before 2010 with no record of form 8862 they recalculated my refund from around $7,100 to 1,300 of course all going to the debt I owe them. I called back and spoke with another rep who said I needed to file form 8862 for 2011 and they would fix 2011 issue me a check and all would be good. He also looked up my 2010 taxes and says it doesnt look like they recieved any correspondence from me. I sent it registered mail so I know they got it and I know when they got it. He said wait the full 8 weeks and if I haven’t heard anything just resend everything. This doesn’t sound right to me. He also told me I should file form 8862 every year. That doesn’t sound right to me either. I don’t really know how to fix all of this but I am feeling extremely screwed over by the IRS.
It does sound lie you’re battling a powerful predator Sheryl. But you’re too close to the issues and therefore counter productive. Like representing myself in my divorce case. I suggest you hire a professional. Your case needs calm, predictable and perservering attention. Hope that helps.
Hello,
I am required to file form 8862 this year which i have all ready to go. I also have to file form 8332 Release of Claim to Exemption for Child by Custodial Parent. Basically my daughters mother and I have came to an agreement where She claims EIC for some years and I others. I get 2012. She is the custodial parent as she gets our daughter 4 days a week and I get her 3. I am worried about filing the 8862 and 8332 together as they basically contradict each other. In 8332, as the custodial parent, she gives me permission to claim EIC but in 8862 I need to declare my daughter lives with me more than half of the year in order to even be able to file the form. Is there a better way of doing this? Please advise. Thank you!
I don’t really have an answer here Ivan, but I wouldn’t falsify the amount of time your child spends with you. In addition I don’t know if trading off the EIC is permissable. I’ve only heard about the Exemption for your Daughter being switched every other year.
how long afther u receive the 8862 form to get your refund
Hi Saffari. It seems logical the IRS looks at Form 8862 closely. So, maybe three months. If they delay and you’ve tried working with the them, consider contacting the Taxpayer Advocate. Hope that helps
Hi! I’m having a problem with my 2012 tax return. I was suppose to get 7164 but I knew most off it was going towards my IRS debt & that was no problem. I only received 1200 as they altered it due to the fact that no EIC could be applied. I have had a issue in the past but I was never ask to send in form 8862 but now they are requesting it. To make a long story short I want know when I submit this form will this apply towards my 2012 account or my EIC for that year would be lost/Disregarded?
OK Delbert.From what you’ve presented I can’t say why the IRS changed your refund. But you have three years to get the IRS to un-change, so to speak, your refund. Hope that helps.
Can i still file an EIC form for 2011 and 2012
Generally you have threes to amend a return. So I think you’re OK, as I understand the situation.
hi gary.
the irs disallowed my eic claim because i couldnt prove that i made the money i told them i made from self-employment. they believed i have the dependents i claimed, they just didnt believe my schedule C.
they didnt mention anything about “willful disregard” of rules or any such nonsense…they just said my self-employment “business activity,” ie, mowing lawns for cash,(which was supplemental to my regular -w2- job) did “…not meet the guidelines of carrying on a trade or business within the meaning of IRS code sec. 162…”
this is partly ok with me, since now i dont owe any tax on the money i made “under the table.”
nevertheless, i didnt get the whole eic refund for my kids.
do i have to file the 8862 next year?
Well Don, making money under the table is illegal. So I think I’ll decline answering any questions.
Hi Gary,
My girlfriend has a genuine passion for babysitting, and this has turned into an interesting determination between Business vs. Hobby. reading through the IRS publication there is really only one criteria that is within question, regarding “intent of profit”. As she enjoys doing this, she’d continue to watch friends & family members children even if they did not pay her (although probably not as often). what we’ve found amazing is that we started estimating her “income” from babysitting (she is a stay at home mom and has no other income) and she probably made roughly 9,000 this year. Since there are really no expenses associated with this, the tax implications (i think) are minimal, as our friends/family generally just drop kids off, providing whatever their kids need while they are here.
My question is more along the lines of filing the EIC for her. I was going to go the TurboTax route, and it seems the way we have her information entered it is allowing her to take the EIC. However, i’m reading on the internet that the IRS has disallowed the EIC in situations where it “appears” the person is only claiming hobby income in order to collect on the EIC. First of all, i think its hilarious that in other situations the IRS wants hobby income included for taxable purposes, but in cases like these they are known to “disallow” the income for the purposes of obtaining the EIC. So, since she meets all the criteria for obtaining the EIC, with the only thing in question being the definition of “earned income”, my questions are:
1. would you include this as hobby income, with $0 in expenses, or should she do this as business income with $0 in expenses? Obviously hobby income in this situation is ideal, since the self-employment taxes would reduce her refund substantially.
2. Are there really issues of obtaining the EIC (she has 1 child, so this is a 3K difference for her) when your only income is “hobby” income? Clearly this is legitimate income (although most of the income being received was in the form of cash). If they deny her for the EIC, she will likely be in a 0$ situation, since she did not make enough to be required to pay federal taxes.
Thank you in advance!
Hi Michael: There are plenty of ways to document intent for profit. I think many folks work just enough, albeit through an employer, to max their EIC. I wouldn’t back off claiming it as income. Hope that helps.
I was disallowed for the 2011 tax year for 2 years, can I file eic for this 2013 tax year or do I have to wait another year and if I can file do I still file the 8862 form? I’ve read on other sites that it’s 2 years exact from the date you were disallowed and other sites don’t specify. If its 2 years exact can I file without the eic now and then file an amended return on the 2 year date? Thanks!
Hi Nikki, so you were disallowed for 2011 and 2012?
I was disallowed my EIC last year and I had to prove it and I did. They sent me a letter that said I didn’t have to put I was disallowed on my taxes anymore. I recently had a baby girl last year but I was wondering if putting her on my taxes would cause me to have to go through the audit process again? I didn’t get my refund from 2012 until Dec 2013 and I don’t want that to happen again.
Hi John. Well the addition to the household probably increases your Earned Income Credit. I don’t know the answer to your question because the IRS doesn’t publish its internal guidelines. But I’d claim her 2013. Hope that helps.
I’ve been battling the irs for years at least 7.. I’ve paid my debt in the 2012 tax season after denial of eic for 2 years during the 2010 tax season.. Im now required to file with form 8862. Does this form mean that I can not claim dependents? This year I have dependents but don’t want to use them if I’m not able to receive credit. Will there be any delays in processing my return due to the 8862 form?
Hi Dave. I think you can claim legitimate dependents. But there could be delays if you do.
My refund was rejected asking for form 8862 and resubmitted and accepted this time,it has been 2 weeks how long will my refund take and why did irs ask for form8862 anyway
It could be months Alicia. Best to call the IRS to ask.
Hey Mr Gary quick question. I was victim of identity theft For the taxes l years of 2009 and 2011 while incarcerated. I filed taxes in 2012 and had to wait about 6 months to receive my return due to the identity theft. I claimed my child and the only thing I had to do was wait the time I was never disallowed or anythjng now this year I go to file on turbo tax and I’m told to fill out form 8862? If I was never disallowed what would cause this?
Don’t know Mario. I’d call the IRS.
I am trying to help my live-in boyfriend file our taxes. When we attempted using Turbo Tax we got the notification that he needed an 8862 form. After doing some research I found out what the form was for and was of course then confused. The last time he filed was in 2010-I’m working on his past years already-and his wages were garnished because of that return. However, upon moving he never received anything in the mail about a disallowance because he never revised his address through the post office. How would I find out if he has been disallowed receiving EIC, and for how long? Also, could the wage garnishment be the reason he needs the 8862? Thank you in advance for whatever information you can give.
Maybe call the IRS? The IRS will tell you why they’re garnishing. Kaitlyn.
Claimed my niece and nephew (sisters kids) as dependents for 2013 tax filing. This was the first time I’ve ever claimed dependents and eitc. Received irs letter my refund is on hold bc I need to provide proof (relationship proof / proof we lived together/medical/school records) which we faxed in then received letter from irs that they received my response march 27 & it’s being reviewed give them until “April 30″. “April 30′ passes, a week later get a letter sorry give us until May 30. May 30 passes , same thing happens letter saying give us another month, we are now in August. I call each month told the same thing we are behind it hasn’t been review we will send another letter with a new date. It’s about 5 months since they’ve received my proof but still haven’t reviewed it. How long can this take, what should I do? really need the money please help.
The IRS is short handed Kelly secondary to budget cuts. You can try the taxpayer advocate who can cut through the red tape for you. Hope that helps.
hi I wanted to know if I have been disallowed for the year of 2013 can I have someone claim my children for the year 2014
If your children meet the 2014 IRS requirements for a dependent from this other person, yes.
My Son was disallowed the eic last year in brcause he withdrew the claim for his Son after finding out that Mom had claimed him. Will he have to file form 8862?
Thanks
I would file Form 8862. Why? It can’t hurt and may prevent problems.
Hi my name is Nia and I got audited last year and and they rejected me this year and told me I had to send a 8862 form could that be the problem form last year because I never fixed the problem last year …and if it was the problem will o get my return fro last year and I been moving around is that another reason my address do not match
Go down to the local IRS office, they can fix that for your Nia.
hi gary i got audited last year and the irs is saying i have not proven that my son and step son lived with me,my fiancee is on public assistance we are all on her case at the assistance office ,we sent everthing to the irs that they wanted but they the irs wouldnt accept the papers that the public assistance office sent thats the only one the irs wont take we tryed to explain to the irs thats the only paper the assistance office would send the irs dont want to hear it said not there problem now its time to file taxes again and i dont now what to do can u give me any input please i dont no where to turn i had my taxes done at a name brand please they helped me at first now they telling me that if i want more help i have to pay where low income and i cant pay there fee so any info please and thank you
Sorry Tony I don’t understand he question well enough to answer. The IRS has free tax software. VITA volunteers might be able to help you.