Sharon Rose is age 63 and retired. She received $7,000 in socialsecurity benefits during the year and $4,850 from a part-time job. Shereceived pension payments of $6,000. Only $5,000 of those payments aretaxable. Sharon had no other income. She lived alone in the UnitedStates for the entire year and cannot be claimed as a dependent onanyone else's return. She does not have any investment income and doesnot have a qualifying child. Sharon reads the steps for eligibility in her Form 1040Ainstructions. In Step 3 she discovers that, because part of herpension is not taxable, she must use Publication 596to find out ifshe can get the EIC. To find her modified AGI, Sharon starts with her AGI of $9,850($4,850 + $5,000), the amount on line 18 of her Form 1040A. To thatamount, she adds $1,000, the nontaxable part of her pension. Theresult is her modified AGI, $10,850, which is not less than $10,200(the limit on modified AGI for people who do not have a qualifyingchild). She cannot take the EIC. She completes the rest of her Form1040A and files it with the IRS. |
