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Earned Income Credit (EIC)Drake Software User’s ManualPrior-YearTaxIf a return is updated from the previous year, the program displays the prior-year taxby default in the Fed tax and State tax fields of screen 1 (Figure 5-42). To overridethe amount shown, enter a new amount. Based on this amount, program calculationsdetermine whether the taxpayer should receive the underpayment penalty._NOTEIncome and payments are split equally among the four quarters. Ifthese figures must be adjusted, enter the payment amounts on the2210 screen. An entry on the 2210 screen overrides the equivalententry made on the ES (Estimated Taxes) screen.Estimated Tax PenaltyThe program automatically calculates estimated tax penalty and displays the calculationon the “Estimated tax penalty” line of Form 1040. To override the system calculation,use the Estimated tax penalty field on screen 5.Earned Income Credit (EIC)The IRS requires that certain questions be addressed on a tax return for a taxpayer toreceive EIC. These questions are located in the following locations within Drake:• EIC Information section of screen 2 (must be completed for each qualifyingdependent)• 8867 screen for Form 8867, Paid Preparer’s EIC Checklist (must be completed forthe taxpayer claiming EIC)In addition, new EIC Due Diligence screens provide supplemental questions to helpensure a comprehensive interview of each taxpayer. While the IRS does not requireanswers to these supplemental questions, the new screens provide a means for collectingvaluable supporting documentation in case of a due diligence audit.EIC Information for DependentIf the taxpayer has EIC with qualifying dependents, the EIC Information section ofscreen 2 must be completed for each qualifying dependent. If item 13a is answeredNo, items 13b and 13c can be left blank, as shown in the example in Figure 5-43.Figure 5-43: One example of a completed EIC Information section (screen 2)If a child is not eligible for EIC, this ineligibility must be specified by selecting theNot eligible for EIC box above item 10. (See Figure 5-43.) Questions 10, 11, and 13can be left blank if this box is selected.130 Tax Year 2008