User's Manual - Drake Software

Earned Income Credit (EIC)
Drake Software User’s Manual
2210 Codes To print or suppress Form 2210 (or Form 2210F) for a return, select one of the following
from the 2210 Code drop list:
Table 5-13: 2210 Codes in Drake
2210
Code
X
P
F
G
N
Program Action
Calculates the estimated penalty; produces Form 2210 if necessary.
Calculates the estimated penalty; produces Form 2210 even if not required.
Calculates the estimated penalty; produces Form 2210F if necessary.
Calculates the estimated penalty; produces Form 2210F even if not required.
Does not calculate the estimated penalty. (If this option is chosen, no form for
underpayment of estimated tax is generated with the return.)
Prior-Year
Tax
If a return is updated from the previous year, the program displays the prior-year tax
by default in the Fed tax and State tax fields of screen 1 (Figure 5-45 on page 153).
To override an amount shown, enter a new amount. Based on this amount, program
calculations determine whether the taxpayer should receive the underpayment penalty.
Estimated Tax Penalty
The program automatically calculates an estimated tax penalty and displays the calculation
on the “Estimated tax penalty” line of Form 1040. To override the system calculation,
use the Estimated tax penalty field at the bottom of screen 5.
NOTE
For information on calculating interest and penalty amounts for future
years, see “Penalty and Interest Calculation” on page 181.
Earned Income Credit (EIC)
The IRS requires that certain questions be addressed on a tax return for a taxpayer to
receive EIC. These questions are located in the following locations within Drake:
• EIC Information section of screen 2 (must be completed for each qualifying
dependent)
• EIC screen for Form 8867, Paid Preparer’s EIC Checklist (must be completed for
the taxpayer claiming EIC)
The EIC Due Diligence screens also provide supplemental questions to help ensure a
comprehensive interview with each taxpayer. While the IRS does not require answers
to these supplemental questions to be submitted with the return, these screens provide
a means for collecting valuable supporting documentation in case of a due diligence
audit.
154 Tax Year 2012