PSLmodels
Incorrect 2020 EITC calculation
The 2020 EITC amount is not always being correctly calculated.
Comparing the results of two similar filing units shows the problem.
Consider this first unit:
% cat UInone.csv
RECID,MARS,e00200,e00200p,EIC,e02300
1, 4, 19330, 19330, 3, 0
and this very similar second unit:
% cat UIsome.csv
RECID,MARS,e00200,e00200p,EIC,e02300
1, 4, 19330, 19330, 3, 10200
Downloading the Tax-Calculator source code from the tip of the master branch on 2022-05-13 and making the taxcalc package, allows a comparison of Tax-Calculator results for these two filing units.
% tc UInone.csv 2020 --dump
% csvshow UInone-20-#-#-#.csv 1 --idvar RECID | grep -e c00100 -e taxbc -e eitc
21 c00100 19330.0
138 eitc 6660.0
201 taxbc 68.0
% tc UIsome.csv 2020 --dump
% csvshow UIsome-20-#-#-#.csv 1 --idvar RECID | grep -e c00100 -e taxbc -e eitc
21 c00100 29530.0
138 eitc 4511.88
201 taxbc 68.0
The two filing units have the same income tax liability before credits, but have very different EITC amounts. The second unit, which is the same as the first unit except for receiving $10,200 in unemployment benefits, should get the same EITC amount as the first unit (rather than getting more than two thousand dollars less).
These two 2020 filing units should get the same EITC amount because their AGI amounts should be equal. You can see that equal EITC amounts is the correct result in two ways. First, you can fill out a 2020 Form 1040 for these two filing units or you can submit them online to TAXSIM35 and compare the results (as shown below).
The cause of this incorrect EITC calculation was pointed out in issue #2648, but no concrete case was supplied to illustrate the problem in that earlier issue.
Here are the details of the TAXSIM35 analysis of these two filing units.
TAXSIM35 generates these results for the first filing unit:
% cat UInone.taxsim35
NBER TAXSIM Model v35 (04/18/22) With TCJA
State law coded through 0
Later state laws extrapolated from 0
Marginal tax rate wrt taxpayer earnings.
Input Data:
1. Record ID: 1.
2. Tax Year: 2020.00
3. State Code: 0.00
4. Marital Status: 1.00 HoH
5-6. Age (Txpyr/Spouse): 40.00 0.00
7. Dependent Exemptions: 3.00
8-10. #deps for CCC/EIC/CTC: 2.00 3.00 3.00
11-12. Wages (Txpyr/Spouse): 19330.00 0.00
11a12a Self-employment income: 0.00 0.00
13. Dividend Income: 0.00
14. Interest Received: 0.00
15. Short Term Gains: 0.00
16. Long Term Gains: 0.00
17. Other Property: 0.00
18. Other Non-Property: 0.00
19. Taxable Pensions: 0.00
20. Gross Social Security: 0.00
21. Tot/Txpy/Spouse UI : 0.00 0.00 0.00
22. Non-taxable Transfers: 0.00
23. Rent Paid: 0.00
24. Property Taxes Paid: 0.00
25. Other Itemized Deds: 0.00
26. Child Care Expenses: 0.00
27. Mortgage Interest: 0.00
28. S-Corp profits: 0.00
29 31. Txpy/Spous QBI w/o PO: 0.00 0.00
30 32. Txpy/Spouse SSTB w PO: 0.00 0.00
Basic Output:
1. Record ID: 1.
2. Year: 2020
3. State (SOI code): 0
4. Federal IIT Liability: -13184.50
5. State IIT Liability: 0.00
6. SS Payroll Tax Liability: 2957.49
Marginal Rates wrt Earner
7. Federal Marginal Rate: 6.06
8. State Marginal Rate: 0.00
9. Taxpayer SS Rate: 15.30
Federal Tax Calculation: Base + $1
10. Federal AGI 19330.00 19331.00
11. UI in AGI 1979+ 0.00 0.00
12. Social Security in AGI 84 0.00 0.00
13. Zero Bracket Amount 18650.00 18650.00
14. Personal Exemptions 0.00 0.00
15. Exemption Phaseout 1991+ 0.00 0.00
16. Deduction Phaseout 1991+ 0.00 0.00
17. Deductions allowed 0.00 0.00
QBI deduction 0.00 0.00
18. Federal Taxable Income 680.00 681.00
19. Federal Regular Tax 68.00 68.10
20. Exemption Surtax 1988-96 0.00 0.00
21. General Tax Credit 1975-8 0.00 0.00
22. Child Tax Credit 68.00 68.10
23 Refundable Part 2524.50 2524.65
24. Child Care Credit 1076+ 0.00 0.00
25. Earned Income Credit 1975 6660.00 6659.79
26. Alternative Min Income: 19330.00 19331.00
27. AMT 0.00 0.00
28. Income Tax Before Credits 68.00 68.10
29. FICA 2957.49 2957.64
Taxpayer share of FICA 1478.74 1478.82
TCJA 2018+
42. QBI Deduction 0.00 0.00
Additional Medicare Taxes 2013+
43. Net Investment Income Tax 0.00 0.00
44. Medicare Tax on Earnings 0.00 0.00
CARES act 2020 only
45. CARES Recovery Rebates 4000.00 4000.00
And TAXSIM35 generates these results for the second filing unit:
% cat UIsome.taxsim35
NBER TAXSIM Model v35 (04/18/22) With TCJA
State law coded through 0
Later state laws extrapolated from 0
Marginal tax rate wrt taxpayer earnings.
Input Data:
1. Record ID: 1.
2. Tax Year: 2020.00
3. State Code: 0.00
4. Marital Status: 1.00 HoH
5-6. Age (Txpyr/Spouse): 40.00 0.00
7. Dependent Exemptions: 3.00
8-10. #deps for CCC/EIC/CTC: 2.00 3.00 3.00
11-12. Wages (Txpyr/Spouse): 19330.00 0.00
11a12a Self-employment income: 0.00 0.00
13. Dividend Income: 0.00
14. Interest Received: 0.00
15. Short Term Gains: 0.00
16. Long Term Gains: 0.00
17. Other Property: 0.00
18. Other Non-Property: 0.00
19. Taxable Pensions: 0.00
20. Gross Social Security: 0.00
21. Tot/Txpy/Spouse UI : 0.00 10200.00 0.00
22. Non-taxable Transfers: 0.00
23. Rent Paid: 0.00
24. Property Taxes Paid: 0.00
25. Other Itemized Deds: 0.00
26. Child Care Expenses: 0.00
27. Mortgage Interest: 0.00
28. S-Corp profits: 0.00
29 31. Txpy/Spous QBI w/o PO: 0.00 0.00
30 32. Txpy/Spouse SSTB w PO: 0.00 0.00
Basic Output:
1. Record ID: 1.
2. Year: 2020
3. State (SOI code): 0
4. Federal IIT Liability: -13184.50
5. State IIT Liability: 0.00
6. SS Payroll Tax Liability: 2957.49
Marginal Rates wrt Earner
7. Federal Marginal Rate: 6.06
8. State Marginal Rate: 0.00
9. Taxpayer SS Rate: 15.30
Federal Tax Calculation: Base + $1
10. Federal AGI 19330.00 19331.00
11. UI in AGI 1979+ 0.00 0.00
12. Social Security in AGI 84 0.00 0.00
13. Zero Bracket Amount 18650.00 18650.00
14. Personal Exemptions 0.00 0.00
15. Exemption Phaseout 1991+ 0.00 0.00
16. Deduction Phaseout 1991+ 0.00 0.00
17. Deductions allowed 0.00 0.00
QBI deduction 0.00 0.00
18. Federal Taxable Income 680.00 681.00
19. Federal Regular Tax 68.00 68.10
20. Exemption Surtax 1988-96 0.00 0.00
21. General Tax Credit 1975-8 0.00 0.00
22. Child Tax Credit 68.00 68.10
23 Refundable Part 2524.50 2524.65
24. Child Care Credit 1076+ 0.00 0.00
25. Earned Income Credit 1975 6660.00 6659.79
26. Alternative Min Income: 19330.00 19331.00
27. AMT 0.00 0.00
28. Income Tax Before Credits 68.00 68.10
29. FICA 2957.49 2957.64
Taxpayer share of FICA 1478.74 1478.82
TCJA 2018+
42. QBI Deduction 0.00 0.00
Additional Medicare Taxes 2013+
43. Net Investment Income Tax 0.00 0.00
44. Medicare Tax on Earnings 0.00 0.00
CARES act 2020 only
45. CARES Recovery Rebates 4000.00 4000.00
Comparing those two results shows this:
% diff UIsome.taxsim35 UInone.taxsim35
24c24
< 21. Tot/Txpy/Spouse UI : 0.00 10200.00 0.00
---
> 21. Tot/Txpy/Spouse UI : 0.00 0.00 0.00
So, TAXSIM35 generates the exact same 2020 EITC amount for these two filing units.
