User's Manual - Drake Software

Earned Income Credit (EIC)
Drake Software User’s Manual
all clients—including returning clients—should be interviewed in order to obtain a
clear picture for the current-year tax return.
The EIC Due Diligence screens can be used as a tool for retaining the inquiries made
of taxpayers to ensure that they meet EIC eligibility requirements. Described in
Table 5-14, these screens contain interview questions and fields that must be completed
(if required by a selection made at Setup > Options > Administrative Options
tab) regarding EIC.
Table 5-14: EIC Due Diligence Screens
Screen
Code
Screen Name
Description
EIC1 EIC Due Diligence - Qualifying Child Screen contains questions pertaining to the age, relationship,
and residency tests for up to three qualifying children.
EIC2 EIC Due Diligence - Income Screen contains questions concerning the taxpayer’s
reported earned income (including income earned from a
legitimate business).
EIC3 EIC Due Diligence - Head of Household Screen contains questions pertaining to the tests for marriage,
qualifying person, and cost of keeping up a home for
Head of Household filing status.
EIC4 EIC Due Diligence - Additional Notes Screen contains space to record data about other inquiries
made in verifying the taxpayer’s information.
These screens are supplemental to the required EIC Preparer Checklist (8867 screen).
At Setup > Options >Administrative Options tab, you can select the option to
require that the screens be filled out. You can also select to print these due diligence
documents. See “Options Setup” on page 27.
See Screen Help, FAQs, and online help for further information and links to IRS documents
and other resources relating to EIC.
NOTE
EIC due diligence requirements must be customized for each client
based on the taxpayer’s scenario. The complexity of the law surrounding
EIC prevents due diligence requirements from being standardized,
so a tax preparer must have a thorough understanding of EIC law in
order to comply with these requirements. Software can help provide
guidance on fulfilling these requirements, but it cannot replace the
knowledge a preparer applies to each taxpayer’s situation.
EIC and Combat Pay
Screen code: 8812
You can override the amount of combat pay from the W-2 that is included in the EIC
calculation. You can also select to include combat pay in the calculation of EIC.
To modify how combat pay is calculated for EIC, open the return and click Add’l
Child Tax Credit/Combat Pay under the first Credits tab. Enter a Combat pay
156 Tax Year 2012