Earned Income Tax Credit § 32 Refundable credit Childless EITC available to TPs at least 25 yrs but no older than 64 – Only if income less than $13,980 For three children or more, increased to 45% Qualifying Children 1 2 3+ None Earned Income Amount 9,320 13,090 13,090 6,210 Max. Amount of Credit 3,169 5,236 5,891 475 Threshold Phaseout (S or HOH) 17,090 17,090 17,090 7,770 Complete Phaseout (S or HOH) 36,920 41,952 45,060 13,980 Threshold Phaseout (married) 22,300 22,300 22,300 12,980 Complete Phaseout (married) $42,130 $47,162 $50,270 $19,190 § 32(c): refundable credit can get a refund even if no tax liability – (2005) v. v. Banaitis Comm’r Banks/Comm’r Banks: Civil suit against employer, fired for discrimination, settled after trial, on contingency fee Banaitis: Suit for interference w/ employment K, attempting to induce him to breach fiduciary duties, settled on contingency fee Issue: whether portion of a money judgment or settlement paid to a under a contingent fee att’y arrangement is income to the Holding: General rule when a recovery constitutes income, the income includes the – litigant’s litigant’s portion of the recovery paid to the as a contingent fee att’y Deduction issue: could have deducted legal expenses except for alternative minimum tax requirements which do not allow misc. itemized deductions Client retains ultimate dominion and control over the underlying claim is just an agent – att’y obligation to act o/b/o and for the exclusive benefit of the client Thus it is appropriate to treat the full amount of recovery as income to the principal Example: can exclude from performing at a charity event; but must include (and can deduct) if “income” designate that all the proceeds of a particular performance will benefit X charity
Earned Income Tax Credit § 32 Refundable credit Childless EITC – available to TPs at least 25 yrs but no older than 64 Only if income less than $13,980 For three children or more, increased to 45% Qualifying Children 1 2 3+ None Earned Income Amount 9,320 13,090 13,090 6,210 Max. Amount of Credit 3,169 5,236 5,891 475 Threshold Phaseout (S or HOH) 17,090 17,090 17,090 7,770 Complete Phaseout (S or HOH) 36,920 41,952 45,060 13,980 Threshold Phaseout (married) 22,300 22,300 22,300 12,980 Complete Phaseout (married) $42,130 $47,162 $50,270 $19,190 § 32(c): refundable credit – can get a refund even if no tax liability Comm’r v. Banks/Comm’r v. Banaitis (2005) Banks: Civil suit against employer, fired for discrimination, settled after trial, on contingency fee Banaitis: Suit for interference w/ employment K, attempting to induce him to breach fiduciary duties, settled on contingency fee Issue: whether portion of a money judgment or settlement paid to a att’y under a contingent fee arrangement is income to the Holding: General rule – when a litigant’s recovery constitutes income, the litigant’s income includes the portion of the recovery paid to the att’y as a contingent fee Deduction issue: could have deducted legal expenses except for alternative minimum tax requirements which do not allow misc. itemized deductions Client retains ultimate dominion and control over the underlying claim – att’y is just an agent obligation to act o/b/o and for the exclusive benefit of the client Thus it is appropriate to treat the full amount of recovery as income to the principal Example: can exclude “income” from performing at a charity event; but must include (and can deduct) if designate that all the proceeds of a particular performance will benefit X charity
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