"Begging" doesn't equal earned income.Last fall, the Tax Court issued several unusual related memorandum decisions on the earned income tax credit The United States federal Earned Income Tax Credit (EITC) is a refundable tax credit that reduces or eliminates the taxes that low-income married working people pay (such as payroll taxes) and also frequently operates as a wage subsidy for low-income workers. (EITC EITC Earned Income Tax Credit EITC Eastern Idaho Technical College EITC Emirates Integrated Telecommunication Company (UAE) EITC Education and Information Transfer Core EITC Electro/Information Technology Conference )--a refundable credit Refundable Credit A tax credit that is not limited by the amount of an individual's tax liability. Typically a tax credit only reduces an individual's tax liability to zero. Refundable credits go beyond this and so really can be considered the same as a payment. available to taxpayers with income below a specific threshold. The cases involved five prisoners who attempted to claim the EITC on money they had obtained from "begging." The Florida inmates claimed that money they solicited from family and friends was earned income from begging. In each case, the prisoner's taxable income was insufficient to result in a tax liability. Also, the inmate had not made any estimated payments or any withholdings during the years in question. The prisoners claimed EITC refunds in amounts from $17 to $90. Two claimed the credit for two years (1996 and 1997). The others claimed it for only one year. The court round the amounts received by the inmates were gifts and not income. In its decision, the court determined that friends and family gave the money to the prisoners out of charity with no expectation of repayment. It said the money was not earned and therefore could not be considered income. The EITCs were not allowed. In its deliberations, however, the court ignored a provision in the Internal Revenue Code The Internal Revenue Code is the body of law that codifies all federal tax laws, including income, estate, gift, excise, alcohol, tobacco, and employment taxes. These laws constitute title 26 of the U.S. Code (26 U.S.C.A. § 1 et seq. that already disallowed the credits. Any income earned for services provided by an inmate in a penal institution is not "earned income" for the purposes of the EITC, according to IRC (Internet Relay Chat) Computer conferencing on the Internet. There are hundreds of IRC channels on numerous subjects that are hosted on IRC servers around the world. After joining a channel, your messages are broadcast to everyone listening to that channel. section 32(c)(2)(B)(iv). Observation. The Tax Court may have been trying to answer a broader question in these cases--can money begged from family and friends be considered income and therefore qualify as earned income for EITC purposes? In its rulings the court addressed the begging issue for all taxpayers--in or out of prison. * (Pradel Lucas v. Commissioner, TC Memo 1999-321; John Walter Wolf, 1999-320; Alfredo Dominquez, 1999-319; Floyd Daniel, Jr., 1999-318; Miguel A. Bauta, 1999-317. --Cheryl Metrejean, CPA (Computer Press Association, Landing, NJ) An earlier membership organization founded in 1983 that promoted excellence in computer journalism. Its annual awards honored outstanding examples in print, broadcast and electronic media. The CPA disbanded in 2000. , assistant professor of the E.H. Patterson School of Accountancy at the University of Mississippi The University of Mississippi, also known as Ole Miss, is a public, coeducational research university located in Oxford, Mississippi. Founded in 1848, the school is composed of the main campus in Oxford and three branch campuses located in Booneville, Tupelo, and Southaven. , Oxford, Mississippi. |
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