Earned Income credit $2941 in interest income, no credit?

Question

Filing my 2007 return. I only earned $15,300 this year. Have $100,000 in savings that earned me $2941 in interest income. Worked the EIC worksheet and it said I do not qualify for the credit!! Had I earned $2899.99 in interest we would have gotten $2200 back. How can this be fair?

Why does the IRS not just deduct the $41 off the $2200? This is the most unfair scenario I've ever seen in the entire IRS tax code.

So bottom line, for a messly $41, I'm out $2200. Makes no sense.

Any way around this?

Answer 1

How is this unfair?  You have $100K in the bank to live off and you still want the government to hand you welfare in the form of EIC?

The EIC exists for people on the low end of the income scale to not starve to death.  With $100K in the bank, I bet you are not starving to death.

I would also love to see where it is written that anything in life is fair.  Especially in taxes.

Answer 2

No, no way around it.  The limits are set, and you are over them.  The EIC is meant to help low income people who don't have other resources to live on - I guess when they made the law, Congress decided that if you had that much investment/interest income, you don't need EIC.  The IRS doesn't make the law, Congress does - the IRS just administers it.

EIC is an extra amount given to you that you didn't earn/pay in/have withheld.  When they decided to have it at all, which some people question whether is "fair", they set rules for someone to be eligible for it.

Answer 3

Nope, no way around it.  If you have more than $2,900 in dividend or interest income you are not eligible for the EIC.  Period.

Congress' rationale wasn't so much the interest or dividend income itself but the wealth behind it that makes you ineligible.  Your have $100k in savings and therefore do no need the "welfare" handout that the EIC actually is.  With 6 figures in the bank, you don't need a handout for basic survival, pure and simple.

The intent behind the EIC is tow-fold.  First, to encourage people at the low end of the wage scale to work instead of collecting welfare.  Secondly, to supplant the inadequate minimum wage.  If the minimum wage had kept up with inflation since 1966 (when a family of 4 could survive on it) it would be around $14 per hour today.  If it was $14 per hour, the EIC would not exist.

You can do much better than the less than 3% you are getting from your bank if you invest your money wisely.  That would give you much more income than the lost EIC would anyway and is what you should be focusing on as opposed to grumbling about losing out on the EIC.

Answer 4

Yo men that is mean.

But you know who can you trust in this world even your own bank makes money on you.

Answer 5

Shaking head.  The Earned Income Credit is to help poor people.  A $100,000 in savings is NOT POOR.

The IRS drew a line in the sand.  The line is $2900 of investment and passive income.  The line should be a lot tighter (eg, $500) or actually have you certify that you don't have more than $50K in assets, imho since it represents resources you could be spending on your own support...instead you are pissed off that you didn't get to take $2200 of MY MONEY through the EIC program.

Answer 6

No, even if you had interest income of $2875, you will get only a few dollars .. 2 or 3 dollars.

Check the EIC chart in the instructions.

Answer 7

Transfer a portion of your savings to a minor child who can earn up to six hundred dollars in interest and owe no tax. This will reduce your interest income to under the limit.  You are right, it makes no sense.  No good deed will go unpunished; you are being punished for being thrifty and saving money.

Answer 8

Go see an accountant that specializes in tax returns. He might be able to file a addendum.