How to report PYEI if I elect to use it for EITC but 2019 was joint return and in 2020 I'm divorced head of household?

Forum|Forum|5 years ago
March 8, 2021
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So, I want to elect to use prior year earned income from 2019 for figuring my earned income tax credit for 2020 because that income is higher thna 2020 but still makes me eligible for EITC. I would enter my 2019 earned income and write PYEI on line 27 of 1040. But in 2019 I was married and filed taxes jointly. Now, in 2020 I'm divorced and kids were declared my tax dependents in divorce decree and only I support them and I am filing my 2020 taxes for the first time as head of household. So do I enter my PYEI (prior year earned income) figure as HALF of what my ex-spouse and I jointly earned/reported/filed in 2019? or do I enter only what I individually earned (on my W2) that was part of the joint 2019 total?

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Best answer by AmyC

Super thanks (of course that's what I was hoping to hear) but can you possibly point out where you found wording or got confirmation that directly provides me IRS guidance that my individual PYEI if I'm going from 2019 married filing jointly to 2020 single head of household is indeed supposed to be reported as 1/2 the joint PYEI? If I live and divorced in a community property state?

I know Turbotax can help me calculate my EITC but it's really up to me to assure the figures I enter are correct according to applicable tax rules. And it's been a bit frustrating since in my experience few of the (?) links to get more information within the interview inside Turbotax are functional. 😞

Publication 596 (2020), Earned Income Credit (EIC) | IRS states:

Election to use prior year earned income.

You can elect to use your 2019 earned income to figure your 2020 earned income credit (EIC) if your 2019 earned income is more than your 2020 earned income. To make this election, enter "PYEI" and the amount of your 2019 earned income on the dotted line next to Form 1040 or 1040-SR, line 27.

If you file a joint return and make the election, your 2019 earned income is the sum of your 2019 earned income and your spouse's 2019 earned income.

From that, we learn two singles in 2019 add their income to file a joint 2020. It is reasonable to expect that to work backwards. If a couple is joint in 2019, then choose the single amount for 2020.

DawnC

Employee

You would still use the amount of Earned Income reported on your jointly filed 2019 return to determine whether or not to use the lookback provision. The Earned Income Credit is going to use your 2020 AGI whether you use 2019 or 2020 earned income. You can only use the lookback provision for the 'earned income' number; TurboTax is still going to use your 2020 AGI as part of the calculation. When you go through the EIC section, you can see what your credit is using both figures and then choose the largest amount. TurboTax will take care of reporting the higher credit on Line 27, you don't need to enter anything directly on Form 1040.

To use the lookback feature in TurboTax Online, go to the Earned Income Tax Credit section.

In the Search box on the top right of your screen, enter EIC or eic and hit enter; click on Jump to eic
Follow the interview until you arrive at a page titled Do you want to use last year's earned income? make a note of the amount of your credit using the 2020 earned income...
Click on Yes and enter your 2019 earned income and click Continue

TurboTax will show your new Earned Income tax credit using your 2019 earned income. If the new credit is higher, click Continue to accept it. If the new credit is lower, click Back to go back to the previous screen and click the radio button No then click Continue.

Where you can find your 2019 earned income amounts: Generally, earned income includes wages (including non-taxable combat pay), tips, and other payments received for services you personally performed.

On a 2019 tax return, this usually includes the total of the amounts reported on:

- Form 1040, line 1 (Wages, salaries, and tips)

- Schedule C, line 3 of Schedule 1 (net business income)

- Schedule F, line 6 of Schedule 1 (net farm income)

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DeanieOAuthor

Thanks, but I'm still confused. you say report what was reported in 2019. But that was a joint return so included income of my ex-spouse's, which I am not filing jointly with now. If both he and I separately claim an EITC based on PYEI and both use the same joint total I don't think IRS will want us both claiming a credit on same income but filing separately since we're divorced now. ?? So are you sure I use the whole joint figure from 2019 or do I enter only 'my' 1/2 (like FAFSA filing) or do I enter only the W2 earnings of that joint figure that I personally earned in 2019 (leaving what my ex earned as his 2019 earned income?) I do know that for a jointly held investment which we split in 2020 the 1099B went to his SS# reporting the whole figures but he had to issue me a 1099 to report 1/2 of that was mine and I entered that 1/2 on my 2020 return.

DawnC

Employee

Since the credit is also based on your 2020 AGI, using the higher earned income number for the lookback provision isn't going to provide you (or your ex) a larger credit than you are entitled to. Since you are both filing your own returns, the EIC is only going to use your individual 2020 AGI amounts as a base amount. You can't both be claiming the same dependents, so the amount you qualify for will be less and that is factored in by having fewer dependents and a lower AGI in 2020. Even if you use the higher joint earned income numbers, the credit will still be based on your 2020 AGI, which is only yours.

You can only use the lookback provision if your 2019 earned income was more than your 2020 earned income. Have you went through the EIC section in TurboTax yet to see what the differences in the credit amounts are?

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