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Get those tax credits: Filing IRS Form 8862

September 7, 2023 By Israel Padilla

Form 8862: How to Claim the EITC or the ACTC After Being Denied by the IRS

If you’ve claimed the Earned Income Tax Credit (EITC) or the Additional Child Tax Credit (ACTC) in the past, but were denied by the IRS, you may need to file Form 8862 to get them back. In this article, we’ll explain what Form 8862 is, who needs to file it, how to fill it out, and where to send it. We’ll also answer some frequently asked questions about Form 8862 and provide some tips on how to avoid common mistakes.

Table of Contents

What is Form 8862?

Form 8862 is a document that you attach to your tax return if you want to claim the EITC or the ACTC after being disallowed by the IRS in a previous year. The purpose of Form 8862 is to show that you meet the eligibility requirements for these credits and that your situation has changed since the last time you claimed them.

Common reasons why the EITC or the ACTC may be disallowed and how to avoid them

The Earned Income Tax Credit (EITC) and the Additional Child Tax Credit (ACTC) are two of the most valuable tax credits for low- and moderate-income taxpayers. However, they are also subject to strict eligibility rules and verification procedures that may result in some taxpayers having their credits disallowed by the IRS. Here are some of the common reasons why the EITC or the ACTC may be disallowed and how to avoid them:

  • Incorrect filing status. To claim the EITC, you must file as single, head of household, qualifying widow(er), or married filing jointly. You cannot claim the EITC if you file as married filing separately. To claim the ACTC, you must file as single, head of household, qualifying widow(er), married filing jointly, or married filing separately. You cannot claim the ACTC if you file as a dependent of another taxpayer.
  • Incorrect or missing Social Security numbers. To claim the EITC or the ACTC, you and your qualifying children must have valid Social Security numbers (SSNs) that are issued before the due date of your tax return. You must also enter the SSNs correctly on your tax return. If you or your qualifying children do not have SSNs, or if you enter them incorrectly, your credits may be disallowed.
  • Incorrect or missing relationship, age, or residency tests. To claim the EITC or the ACTC, your qualifying children must meet certain relationship, age, and residency tests. For example, your qualifying children must be your son, daughter, stepchild, foster child, brother, sister, or a descendant of any of them. They must also be under age 19 at the end of the year (or under age 24 if they are full-time students) and live with you in the U.S. for more than half of the year. If you do not meet these tests, or if you do not provide sufficient documentation to prove them, your credits may be disallowed.
  • Incorrect or missing income information. To claim the EITC or the ACTC, you must have earned income from working for someone else or from running or owning a business or farm. You must also report all of your income from all sources on your tax return. If you do not have earned income, or if you omit or underreport any income, your credits may be disallowed.

To avoid having your EITC or ACTC disallowed, make sure you meet all the eligibility requirements and provide accurate and complete information on your tax return. You should also keep records of your income, expenses, and other relevant documents to support your claim. If you receive a letter from the IRS asking for more information or verification of your credits, respond promptly and follow the instructions carefully. If you disagree with the IRS’s decision to disallow your credits, you have the right to appeal.

For the purposes of this article, we will assume that you had your tax credits disallowed for a valid reason, you have fixed the situation and want to use Form 8862 to claim the credits back.

Need Specialized Help with EITC, ACTC or Form 8862?

At Bottomline Tax, we want to give our readers the best information we can compile, however your specific situation as a taxpayer may exceed the contents of this article. We always recommend readers consult a tax professional in case of unresolved questions.

Who needs to file Form 8862?

You need to file Form 8862 if ALL of the following apply to you:

  • You claimed the EITC or the ACTC in a previous year, but the IRS reduced or disallowed your credit for any reason other than a math or clerical error.
  • You are eligible for the EITC or the ACTC in the current year, based on your income, family size, and filing status.
  • You have a valid Social Security number for yourself, your spouse (if filing jointly), and any qualifying children.
  • You have not been banned from claiming the EITC or the ACTC for 10 years due to fraud or reckless disregard of the rules.

How to fill out Form 8862?

Form 8862 is a four-page form (download here) that consists of five parts. We will explain each of them:

  1. Part I of the form is where you indicate which credits you are claiming and which parts of the form you need to complete. Here are some details about Part I:
    • You need to enter the tax year for which you are filing this form, such as 2022, on line 1.
    • You need to check the box(es) for the credit(s) you are claiming on line 2. You can claim one or more of the following credits: Earned Income Credit (EIC), Child Tax Credit (nonrefundable or refundable)/Additional Child Tax Credit/Credit for Other Dependents (CTC/RCTC/ACTC/ODC), or American Opportunity Tax Credit (AOTC).
    • Depending on which credit(s) you are claiming, you will need to complete Part II, Part III, or Part IV of the form. For example, if you are claiming the EIC, you need to complete Part II. If you are claiming the CTC/RCTC/ACTC/ODC, you need to complete Part III. If you are claiming the AOTC, you need to complete Part IV. You only need to complete the part(s) that match the credit(s) you are claiming.
    • You must complete Form 8862 and attach it to your tax return if both of the following apply: your EIC, CTC/RCTC/ACTC/ODC, or AOTC was previously reduced or disallowed for any reason other than a math or clerical error; and you now want to claim the credit that was previously reduced or disallowed and you meet all the requirements for the credit.
  2. Part II of the form is where you indicate if you are eligible to claim the Earned Income Credit (EIC) and answer some questions about your income, age, and residency. Here are some details about Part II:
    • You need to complete Part II if you checked the box for the EIC in Part I. The EIC is a tax credit for low- to moderate-income workers and families.
    • You need to answer question 3 to see if the only reason your EIC was reduced or disallowed in the past was because of a reporting error. If you answer “Yes”, you do not need to complete the rest of Part II. If you answer “No”, you need to continue.
    • You need to answer question 4 to see if you (or your spouse if filing jointly) could be claimed as a qualifying child of another taxpayer. If you answer “Yes”, you cannot claim the EIC. If you answer “No”, you need to continue.
    • Depending on whether you have a qualifying child or not, you will need to complete Section A or Section B of Part II. A qualifying child is a child who meets certain requirements related to age, relationship, residency, and citizenship. You can find more information about these requirements in Pub. 596.
    • Section A is for filers with a qualifying child or children. You need to enter the name(s) of each child for whom you are claiming the EIC and answer questions 5, 7, and 8 for each child. Question 5 asks if you have a completed Schedule EIC for the year entered on line 1. Question 7 asks how many days each child lived with you in the United States during the year. Question 8 asks if the child was born or died during the year.
    • Section B is for filers without a qualifying child or children. You need to answer questions 9, 10, and 11 for yourself and your spouse (if filing jointly). Question 9 asks how many days your main home was in the United States during the year. Question 10 asks your age at the end of the year. Question 11 asks if you (or your spouse) can be claimed as a dependent on another taxpayer’s return.
    • You also need to complete Part V if the child meets the conditions to be a qualifying child of any other person (other than your spouse if filing jointly). Part V will help you determine which person can claim the child as a qualifying child for the EIC and certain other child-related benefits.
    • Part II will help you determine if you meet the requirements for the EIC and avoid errors that may result in your EIC being reduced or disallowed.
  3. Part III of the form is where you indicate if you are eligible to claim the Child Tax Credit (nonrefundable or refundable), Additional Child Tax Credit, or Credit for Other Dependents. Here are some details about Part III:
    • You need to complete Part III if you checked the box for any of these credits in Part I. These credits are for taxpayers who have qualifying children or other dependents that meet certain requirements.
    • You need to enter the name(s) of each child or other dependent for whom you are claiming the credit and answer some questions about their relationship, residency, and citizenship status. A child is a person who is your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, half brother, half sister, or a descendant of any of them. An other dependent is a person who is not your qualifying child but meets the requirements to be your dependent.
    • You need to answer question 14 to see if the child lived with you for more than half of the year or met an exception described in the instructions. Some exceptions include temporary absences due to illness, education, business, vacation, or military service; children who were born or died during the year; and children of divorced or separated parents.
    • You need to answer question 15 to see if the child met the requirements to be a qualifying child for the CTC/RCTC/ACTC. These requirements include age, relationship, support, and joint return tests. You can find more information about these tests in Pub. 972.
    • You need to answer question 16 to see if the person claimed as a qualifying child or other dependent is your dependent. To be your dependent, the person must meet either the qualifying child test or the qualifying relative test. You can find more information about these tests in Pub. 501.
    • You need to answer question 17 to see if the person claimed as a qualifying child or other dependent is a citizen, national, or resident of the United States. A person is a resident of the United States if they meet either the green card test or the substantial presence test. You can find more information about these tests in Pub. 519.
    • If you answer “No” to question 14, 15, 16, or 17, you cannot claim the CTC/RCTC/ACTC/ODC for that child or other dependent.
    • Only one person can claim the child as a qualifying child for the CTC/RCTC/ACTC/ODC. If the child meets the conditions to be a qualifying child of any other person (other than your spouse if filing jointly), complete Part V. Part V will help you determine which person can claim the child as a qualifying child for the EIC and CTC/RCTC/ACTC/ODC and certain other child-related benefits.
  4. Part IV is about the American Opportunity Tax Credit (AOTC), which is a tax credit for eligible students who are pursuing higher education. Here are some details about this part:
    • The AOTC can reduce your tax liability by up to $2,500 per year for each student who meets the eligibility requirements.
    • To claim the AOTC, you must complete Form 8863 and attach it to your tax return. You must also receive Form 1098-T from your school, which shows the amount of qualified education expenses you paid.
    • An eligible student for the AOTC must be pursuing a degree or other recognized credential, be enrolled at least half time for at least one academic period, not have completed the first four years of higher education, not have claimed the AOTC or the former Hope credit for more than four tax years, and not have a felony drug conviction.
    • You must answer questions 18 and 19 for each student for whom you are claiming the AOTC. These questions ask about the student’s eligibility and the number of years you have claimed the credit for them.
    • The AOTC is partially refundable, which means that you can get a refund of up to $1,000 per student if the credit exceeds your tax liability.
  5. Part V is about the situation where a child meets the conditions to be a qualifying child of more than one person for the purposes of claiming certain tax credits. Here are some details about this part:
    • You need to answer questions 20 to 22 for each child who is a qualifying child of any other person (other than your spouse if filing jointly).
    • Question 20 asks you to enter the name of each child who is a qualifying child of more than one person.
    • Question 21 asks you to enter the address where you and the child lived together during the year. If you lived with the child at more than one address, you need to attach a list of the addresses.
    • Question 22 asks you to enter the name and relationship of any other person (except your spouse and dependents) who lived with the child for more than half the year.
    • To determine which person can claim the child as a qualifying child for the Earned Income Credit (EIC) and Child Tax Credit (CTC)/Refundable Child Tax Credit (RCTC)/Additional Child Tax Credit (ACTC), you need to refer to Publication 501, which explains the tiebreaker rules for these credits.
    • If you are a noncustodial parent who is entitled to claim the child as a qualifying child, you do not need to complete Part V.
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As you can see, people with different situations and goals will fill out Form 8862 in a unique way.

Let’s talk about Scenario 1: A taxpayer claimed the Earned Income Tax Credit (EITC) on their tax return, but the IRS disallowed the credit. The taxpayer has corrected the issue that led to the disallowance and wants to claim the EITC again.

To fill out Form 8862 for EITC in scenario 1, you need to follow these steps:

  • Download or print Form 8862 and its instructions from the current web page context or the IRS website.
  • Fill out Part I by entering the tax year, your name and social security number, and checking the box for Earned Income Credit.
  • Fill out Part II by answering the questions related to your EIC eligibility. If you have a qualifying child, complete Section A. If you don’t have a qualifying child, complete Section B. If you have a qualifying child who is also a qualifying child of another person, complete Part V.
  • Attach Form 8862 to your tax return along with Schedule EIC if you have a qualifying child.
  • Make sure you meet all the other requirements for the EIC, such as having earned income, filing status, investment income, etc.

Consider Scenario 2: A taxpayer claimed the Child Tax Credit (CTC) or Additional Child Tax Credit (ACTC), but the IRS disallowed it. The taxpayer has resolved the issue and wants to claim the CTC or ACTC again.

To fill out Form 8862 for CTC or ACTC in scenario 2, follow these steps:

  • Download or print Form 8862 and its instructions from the current web page context or the IRS website.
  • Fill out Part I by entering the tax year, your name and social security number, and checking the box for Child Tax Credit (nonrefundable or refundable)/Additional Child Tax Credit/Credit for Other Dependents.
  • Fill out Part III by answering the questions related to your CTC/RCTC/ACTC/ODC eligibility. If you have a qualifying child, enter their name and answer questions 14 to 17. If you have a dependent who is not a qualifying child, enter their name and answer questions 16 and 17.
  • Attach Form 8862 to your tax return along with Schedule 8812 if you are claiming the RCTC or ACTC.
  • Make sure you meet all the other requirements for the CTC/RCTC/ACTC/ODC, such as income limits, filing status, dependency rules, etc.
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Next is Scenario 3: A taxpayer claimed the American Opportunity Tax Credit (AOTC), but it was disallowed by the IRS. The taxpayer has rectified the issue and wants to claim the AOTC again.

To fill out Form 8862 for AOTC in scenario 3, just follow these steps:

  • Download or print Form 8862 and its instructions from the current web page context or the IRS website.
  • Fill out Part I by entering the tax year, your name and social security number, and checking the box for American Opportunity Tax Credit.
  • Fill out Part IV by answering the questions related to your AOTC eligibility. If you have more than three students, attach a statement also answering questions 18 and 19 for those students. Enter the name(s) of the student(s) as listed on Form 8863.
  • Attach Form 8862 and Form 8863 to your tax return.
  • Make sure you meet all the other requirements for the AOTC, such as income limits, enrollment status, qualified expenses, etc.

Where to send Form 8862?

You need to attach Form 8862 to your tax return and mail it to the same address where you would normally file your return. You can find the address for your state on the IRS website or in the instructions for Form 1040. Do not send Form 8862 separately from your tax return.

Frequently asked questions about Form 8862

Here are some common questions and answers about Form 8862:

Q: How long does it take for the IRS to process Form 8862?

A: It may take longer than usual for the IRS to process your tax return if you attach Form 8862. The IRS may also request additional information or documentation from you before approving your credit. You can check the status of your refund on the IRS website or by calling 1-800-829-1954.

Q: What if I don’t file Form 8862 when I’m supposed to?

A: If you don’t file Form 8862 when you’re required to do so, the IRS will deny your EITC or ACTC for the current year and may also impose penalties and interest on any unpaid taxes. You may also lose your right to claim these credits in future years.

Q: What if I file Form 8862 when I don’t need to?

A: If you file Form 8862 when you don’t need to do so, it won’t affect your tax return or refund. However, it may delay the processing of your return and cause unnecessary paperwork for you and the IRS.

Q: What if I make a mistake on Form 8862?

A: If you make a mistake on Form 8862, you should correct it as soon as possible and file an amended return with the IRS. You can use Form 1040X to amend your return and attach an updated Form 8862. You should also explain the reason for the change and provide any relevant documents.

Tips on how to avoid common mistakes on Form 8862

Here are some tips on how to avoid common mistakes on Form 8862:

  1. Check Your Eligibility: Before you begin, make sure you’re eligible for the credit you’re claiming. Each credit has specific eligibility requirements that you must meet.
  2. Use the Correct Tax Year: Make sure to enter the correct tax year on line 1 of the form.
  3. Provide Accurate Information: Ensure that all personal information, such as your name and Social Security Number (SSN), is accurate and matches the information on your tax return.
  4. Answer All Questions: Don’t leave any questions blank. If a question doesn’t apply to you, enter “N/A” or “0”.
  5. Attach to Your Tax Return: Don’t forget to attach Form 8862 to your tax return when you file.
  6. Keep Copies: Keep a copy of Form 8862 and all other tax documents for your records.

Conclusion

Form 8862 is an important document that you need to file if you want to claim the EITC or the ACTC after being denied by the IRS in a previous year. By following the instructions and tips in this article, you can fill out Form 8862 correctly and get your credit back.

For taxpayers who need more help or have specific questions about Form 8862, the IRS provides several resources:

  1. Form 8862 Information Page: The IRS has a dedicated page for Form 8862. This page provides a downloadable PDF of the form, as well as instructions for completing it.
  2. Instructions for Form 8862: The IRS provides detailed instructions for Form 8862. These instructions provide step-by-step guidance on how to complete the form.
  3. IRS Contact Information: If you need to speak with someone at the IRS, you can call their general helpline at 1-800-829-1040. However, please note that wait times can be long, especially during tax season.
  4. Taxpayer Advocate Service: If you are experiencing economic harm, seeking help in resolving tax problems that have not been resolved through normal channels, or believe that an IRS system or procedure is not working as it should, you may be eligible for Taxpayer Advocate Service (TAS) assistance. You can reach them at 1-877-777-4778.