Individuals caught fraudulently claiming the EIC (Earned Income Credit) is ineligible to claim the credit for ten years.

For individuals charged with being reckless or bending the EIC rules, they can be penalized for two years.  In recent years, IRS has proven to be extremely concerned with EIC fraudulent cases and are examining returns very carefully.

To legally claim a child for EIC purposes, the following rules apply:

• The child MUST be your child; adopted child, stepchild or foster child placed by an authorized agency.
• A relative (child) that you have cared for as you would your own child may qualify. (see www.irs.gov ; Instruction 1040 EIC for details)
• Residence Test:  Your child must have lived with you in your main home in the US for more then six months.
• Age Test:  The child must be younger then 19 years of age, unless the child is a full-time student or totally and permanently disabled.
• Qualifying Child Test:  The qualifying child cannot be the qualifying child of another person.

The EIC is for eligible low-wage taxpayers with children.  On 2005 returns, the maximum credit can be as much as $4,400 for workers supporting two or more kids. 

A single filer's adjusted gross income must be less than $11,750 if he or she has no children, $31,030 with one child and $35,263 with two or more kids. Married couples filing jointly are allowed to earn $2,000 more in each category and still claim the claim.  If you make more than $2,700 in investment income, you cannot file for the earned income credit.

For more information go to:  IRS Publication 596, Earned Income Credit

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