{"id":1051,"date":"2017-02-24T19:21:10","date_gmt":"2017-02-25T00:21:10","guid":{"rendered":"https:\/\/www.etax.com\/blog\/?p=1051"},"modified":"2019-07-10T15:36:51","modified_gmt":"2019-07-10T19:36:51","slug":"earned-income-tax-credit-proving-earned-income","status":"publish","type":"post","link":"https:\/\/www.etax.com\/blog\/2017\/02\/24\/earned-income-tax-credit-proving-earned-income\/","title":{"rendered":"The Earned Income Tax Credit: Proving Earned Income"},"content":{"rendered":"

Taxpayers who claim deductions typically understand that they have to be able to prove that they qualify for the deduction<\/a>. For example, you know if you claim business expenses, charity gifts, or other costs for deduction, that you\u2019ll need to supply documents such as receipts, cancelled checks, or bank statements in the event of an audit<\/a>. This is pretty standard knowledge among most taxpayers who file for deductions.<\/p>\n

However, a recent court case required a taxpayer to prove that she earned the amount she reported when filing a return, in which she used Head of Household status, and claimed three children and herself for exemptions. When asked to provide receipts or documentation, she stated that she used cash for all transactions, and did not keep any paper trail or written log of any expenses or sales of clothing. As a result, the IRS stated that the woman failed to prove the amount of earned income she was claiming, and recalculated her return.<\/p>\n

The EITC<\/u><\/h4>\n

The Earned Income Tax Credit<\/a> uses a percentage of a taxpayer\u2019s earned income. Earned income includes wages and earnings from self-employment work. This credit is fully refundable<\/a>, which means eligible taxpayers can get money back from the EITC even if they weren\u2019t required to pay taxes.<\/p>\n

The Child Tax Credit<\/u><\/h4>\n

The child tax credit<\/a> is only refundable if the taxpayer\u2019s earned income is greater than $3,000, and they owe less income tax than the amount of the credit. When the credit is refundable, it\u2019s known as the Additional Child Tax credit, which is equal to either:<\/p>\n