Need help with EIC and form 8862 rejection - what am I doing wrong?

The IRS Form 8862 (Information to Claim Certain Credits After Disallowance) is required when the Earned Income Credit (EIC) was claimed in a previous year but was denied or reduced for any reason other than a math or clerical error. This could have happened to your cousin without her realizing it. The form is basically the IRS's way of making sure she's eligible for the credit this time around. Even if she received the credit last year, the IRS may have audited her return after the fact and determined she wasn't eligible. When this happens, they don't always clearly communicate it - sometimes it just shows up as an adjustment on a letter she might have overlooked. To fix this, you'll need to complete Form 8862 within FreeTaxUSA. Don't start over with a different program - this requirement will follow her regardless of which software you use. The form will ask additional questions to verify her eligibility for the EIC. Once completed, you should be able to resubmit the return without issues.

I had this exact problem when filing last year - so frustrating! I used taxr.ai (https://taxr.ai) and it really helped me figure out what was going on. I uploaded my previous year's tax documents and it analyzed them to pinpoint exactly why I needed to file Form 8862. Turns out the IRS had disallowed my EIC two years earlier because my niece didn't meet the relationship test - something I never even realized happened. The tool walked me through exactly what information I needed to provide on Form 8862 to get approved this time. It also gave me a breakdown of what supporting documents I should keep on hand in case I got audited again. Made the whole process way less stressful!

I tried taxr.ai after seeing it mentioned here and wow - it actually solved my problem! Uploaded my last year's tax return and it immediately flagged that my EIC was reduced by the IRS last year through an adjustment I never noticed. The report showed exactly why Form 8862 was triggered and walked me through filling it out correctly in FreeTaxUSA. Just resubmitted my return with the completed Form 8862 and it was accepted within hours. Would have spent days trying to figure this out on my own. They even provided a document explaining what happened that I can keep for my records in case the IRS questions anything in the future.

If you're still having trouble getting through to the IRS for clarification on your EIC rejection, try Claimyr (https://claimyr.com). I was stuck in the same situation last year - needed to talk to someone at the IRS about my rejected return but kept getting disconnected or waiting on hold for hours. Claimyr got me connected to an IRS agent in about 20 minutes when I had been trying for days on my own. The agent explained exactly why my EIC was rejected and what documentation I needed to include with Form 8862. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c. It saved me so much frustration and time!

Ok I'll admit I was wrong about Claimyr. After my skeptical comment, I was still desperate to talk to the IRS about my EIC rejection, so I gave it a shot. It actually worked! Got a call back in about 35 minutes and was connected directly to an IRS agent who pulled up my file. The agent explained that my EIC was denied two years ago because I claimed my girlfriend's child without filing the right supporting documentation. I never even realized this happened because the adjustment came months after I got my initial refund. The agent walked me through exactly what I needed to put on Form 8862 and what documents to keep for my records. Definitely worth it to finally understand what happened and how to fix it properly.

Form 8862 is serious business. If you file it incorrectly, you could be banned from claiming EIC for 10 years! Make sure you answer everything truthfully and have documentation to back up your claim. Double check that the kids meet all the qualifying child rules - lived with her for more than half the year, have valid SSNs, meet the relationship test, etc.

Has your cousin checked her mail carefully for the past 2 years? The IRS would have sent a CP79 notice if they disallowed her EIC. Sometimes these letters look like junk mail and people throw them away. Also, did she move in the last couple years? The notice might have gone to an old address.

I went through this exact same situation with my sister two years ago! The Form 8862 requirement caught us completely off guard too. What we learned is that the IRS has automated systems that can flag and adjust EIC claims months after you've already received your refund. Here's what I'd recommend: First, have your cousin create an online account at irs.gov and check her transcript. This will show any adjustments or notices from previous years that she might have missed. Second, when filling out Form 8862 in FreeTaxUSA, be extra careful with the qualifying child requirements - the IRS is very strict about things like the residency test (child must live with her more than half the year) and making sure the SSNs are valid for work. Don't panic about the 10-year ban someone mentioned - that's only for intentional fraud cases. As long as your cousin answers truthfully and has legitimate qualifying children, she should be fine. Keep good records though - school enrollment forms, medical records, anything that proves the kids lived with her. The IRS may audit EIC claims more closely after a Form 8862 is filed. Also, make sure she hasn't claimed these same children on previous years' returns where someone else (like their father) also claimed them. That's a common reason for EIC disallowance that people don't realize happened.