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Revised Rules Allow More Taxpayers to Claim the EITC without a Qualifying Child

The IRS changed its position on who may claim the earned income tax credit (EITC) without a qualifying child in situations in which an individual meets the definition of a qualifying child for more than one taxpayer. Under the new rules, a taxpayer who may not claim an individual as a qualifying child after applying the tie-breaker rules may now claim the EITC without a qualifying child, if all other requirements are met.

The new rule is explained in proposed regulations issued on January 19, 2017. This change affects all open tax years. You may apply this rule on a return or an amended return for an earlier year that is open under the statute of limitations.

This new rule may apply in households an individual meets the definition of a qualifying child for more than one taxpayer.  For example, this new rule may apply in households if grandparents, children, and grandchildren live together or in households with unmarried parents who both work. For more information and examples, see Applying Tiebreaker Rules to the Earned Income Tax Credit.


PATH Act Legislation and Expanded Due Diligence Requirements

  •  Refunds. Effective in 2017, the Protecting Americans from Tax Hikes PATH Act requires the IRS to hold the refunds for tax returns claiming the Earned Income Tax Credit (EITC) and the Additional Child Tax Credit (ACTC) until February 15. This change affects some returns submitted early in the tax filing season. We will process returns as usual, but to comply with the law, will hold the refunds on EITC and ACTC-related returns until mid-February. File your returns as you normally do and don’t hold them.

  • Expanded due diligence requirements. The PATH Act also extended due diligence requirements to returns claiming the child tax credit/additional child tax credit (CTC/ACTC) and the American opportunity tax credit (AOTC). Last year due diligence only applied to EITC. See “Paid Preparer Due Diligence Penalties” below for information on how IRS can assess penalties.

  • Form 8867, Paid Preparers Due Diligence Credit Checklist. In previous years, the law required paid preparers to complete and submit the Form 8867 with every EITC claim. The form now includes the CTC and the AOTC. Beginning in 2017, paid preparer will need to complete and submit the Form 8867 with every electronic or paper return claiming the EITC, the CTC or the AOTC or any claim for refund with one or more of the credits. The IRS can assess penalties when the Form 8867 is not completed or not included with the tax return claiming one of the credits. The revised Form 8867 instructions are available.

New Law Effects Puerto Rican Birth Certificates

IRS no longer accepts Puerto Rican birth certificates issued before July 1, 2010. The Government of Puerto Rico passed a new law, Law 191 of 2009 as amended. The law requires all those with Puerto Rican birth certificates issued before July 1, 2010 get new documentation from the Puerto Rico Vital Statistics Record Office. Find more about the law at the Puerto Rico Federal Affairs Administration website.


Advance Payments of EITC Eliminated

Legislation signed by the President August 10, 2010 repeals the Advanced Earned Income Tax Credit. Recipients will not be able to claim Advance EITC after December 31, 2010.