Internal Revenue Service United States Department of the Treasury
Level Basic Advanced Military International

Earned Income Credit (EIC)

Qualifying for the EIC

Self-Employment Income

Net earnings from self-employment are considered earned income. This includes all income, even pay for side jobs or contract labor, even when taxpayers do not think of themselves as self-employed. Report all self-employment income and expenses on Schedule C-EZ, Net Profit from Business, or Schedule C, Profit or Loss from Business. Taxpayers with a reason to file Schedules C and C-EZ should seek the assistance of a professional tax preparer.

Caution

An IRS certified volunteer tax preparer must exercise due diligence when preparing or assisting in the preparation of, approving, and filing tax returns. Although a volunteer tax preparer may rely in good faith without requiring certain documents from the taxpayer, the tax preparer must ask questions if the information furnished appears to be incorrect, inconsistent, or incomplete.

For most taxpayers who are within the scope of the VITA/TCE programs, net earnings for EIC purposes will be the amount reported on line 12 of Form 1040, minus the deductible portion of the self-employment tax reported in the Adjusted Gross Income section of the tax return.

Example

Jeff's self-employment income reported on Form 1040, line 12 is $2,000. The deduction for the deductible portion of his self-employment tax, which is recorded in the adjustments section of Form 1040, is $142. Jeff's income, for EIC purposes, is $2000-$142=$1858.