How To Figure the EIC Yourself

You may be able to use an EIC worksheet in your tax package instead of EIC Worksheet A or B at the end of this chapter. If you are filing Form 1040EZ, you can use the worksheet in your tax package. If you are filing Form 1040A, you can use the worksheet in your tax package if you answered "No" to the first two questions in Step 3 of the instructions for lines 38a and b. If you are filing Form 1040, you can use a worksheet in your tax package if you got to Step 3 of the instructions for lines 60a and 60b and answered "No" to the first five questions in that step.

How To Use EIC Worksheets A and B

Tip: Keep your tax return handy while you complete EIC Worksheet A or B. Use EIC Worksheet A (page 28) or EIC Worksheet B (page 29) to figure the amount of your EIC. This section explains how to use these worksheets and how to report the EIC on your return.

EIC Worksheet A. Use EIC Worksheet A if you are not self-employed, a church employee who files Schedule SE, or a statutory employee filing Schedule C or C-EZ. You will need the amounts you figured in the worksheets earlier in this chapter to complete EIC Worksheet A.

EIC Worksheet B. Use EIC Worksheet B if you are self-employed, a church employee who files Schedule SE, or a statutory employee filing Schedule C or C-EZ. You will need the amounts you figured in the worksheets earlier in this chapter to complete EIC Worksheet B. If any of the following situations apply to you, read the paragraph and then complete EIC Worksheet B.

Net earnings from self-employment. If your net earnings from self-employment are $400 or more, be sure to correctly fill out Schedule SE (Form 1040) and pay the proper amount of self-employment tax. If you do not, you may not get all the EIC you are entitled to.

When to use the optional methods of figuring net earnings. Using the optional methods on Schedule SE to figure your net earnings from self-employment may qualify you for the EIC or give you a larger credit. If your net earnings (without using the optional methods) are less than $1,600, see Publication 533, Self-Employment Tax, and the instructions for Schedule SE, for details about the optional methods.

When both spouses have self-employment income. You must complete both Parts 1 and 2 of EIC Worksheet B if all of the following conditions apply to you.

1. You are married filing a joint return.
2. Both you and your spouse have income from self-employment.
3. You or your spouse files a Schedule SE and the other spouse does not file Schedule SE.

Statutory employees. Statutory employees report wages and expenses on Schedule C or C-EZ. They do not file Schedule SE. If you are a statutory employee, enter amounts from Schedule C or C-EZ in Part 3 when you complete EIC Worksheet B.

Special Instructions for Clergy, Household Employees, and Prison Inmates

Use the following special instructions if one of the following situations applies to you.

Minister or member of a religious order. If you are filing Schedule SE and line 2 of that schedule includes an amount that is also included on line 7 (Form 1040), print "Clergy" directly to the right of line 60a (Form 1040). Also show the amount included on both lines (for example, "Clergy $800"). If you received a housing allowance or were provided housing and you were required to include the allowance or the rental value of the parsonage on Schedule SE, line 2, do not include it as nontaxable earned income on line 60b (Form 1040).

Household employee. If you were a household employee who did not receive a Form W-2 because your employer paid you less than $1,200 in 2000, print "HSH" and the amount paid that was not reported on Form W-2 in the space on the dotted line next to line 7 (Form 1040), in the space to the left of line 7 (Form 1040A), or in the space to the right of the words "W-2 form(s)" on line 1 (Form 1040EZ). Also, be sure to include that amount in the total for line 7 of either Form 1040 or Form 1040A, or line 1 of Form 1040EZ.

Inmates. If you were an inmate in a penal institution and the total on line 7 (Form 1040 or Form 1040A) or line 1 (Form 1040EZ) includes an amount paid to you for work you performed while an inmate, print "PRI" and the amount paid on the dotted line next to line 7 (Form 1040), in the space to the left of line 7 (Form 1040A), or in the space to the right of the words "W-2 form(s)" on line 1 (Form 1040EZ).

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