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If you are using your 2019 earned income to fig- ure your 2021 EIC and you elected to include nontaxable combat pay, be sure to use 2019 non- taxable combat pay and enter that amount on Form 1040 or 1040-SR, line 27b. The following examples illustrate the effect of including nontaxable combat pay in earned income for the EIC. Example 1—Election increases the EIC. George and Janice are married and will file a joint return. They have one qualifying child. George was in the military and earned $15,000 ($5,000 taxable wages + $10,000 nontax- able combat pay). Janice worked part of the year and earned $2,000. Their taxable earned income and AGI are $7,000. George and Janice qualify for the EIC and fill out the EIC Worksheet and Schedule EIC. When they complete the EIC Worksheet without adding the nontaxable combat pay to their earned income, they find their credit to be $2,389. When they complete the EIC Worksheet with the nontaxable combat pay added to their earned income, they find their credit to be $3,584. Be- cause making the election will increase their EIC, they elect to add the nontaxable combat pay to their earned in- come for the EIC. They enter $3,584 on line 27b of their Form 1040. Example 2—Election doesn't increase the EIC. The facts are the same as in Example 1, except George had nontaxable combat pay of $30,000. When George and Janice add their nontaxable combat pay to their earned income, they find their credit to be $1,771. Be- cause the credit they can get if they don't add the nontax- able combat pay to their earned income is $2,389, they decide not to make the election. They enter $2,389 on line 27b of their Form 1040. IRS Will Figure the EIC for You The IRS will figure your EIC for you if you follow the in- structions in Figure B. Please don't ask the IRS to figure your EIC unless you are eligible for it. To be eligible, you must meet Rule 15 in this chapter as well as the rules in chapter 1 and either chapter 2 or chapter 3, whichever ap- plies to you. If your credit was reduced or disallowed for any year after 1996, the rules in chapter 5 may apply as well. How To Figure the EIC Yourself To figure the EIC yourself, use the EIC Worksheet in the instructions for Form 1040 and 1040-SR. If you have a qualifying child, complete Schedule EIC (discussed later in this chapter) and attach it to your tax return. If you want the IRS to figure your EIC for you, see IRS Will Figure the EIC for You, earlier. CAUTION ! CAUTION ! Special Instructions—EIC Worksheets You will need to decide whether to use EIC Worksheet A or EIC Worksheet B to figure the amount of your EIC. This section explains how to use these worksheets and how to report the EIC on your return. EIC Worksheet A. Use EIC Worksheet A if you weren’t self-employed at any time in 2021 and aren't a member of the clergy, a church employee who files Schedule SE, or a statutory employee filing Schedule C. EIC Worksheet B. Use EIC Worksheet B if you were self-employed at any time in 2021 or are a member of the clergy, a church employee who files Schedule SE, or a statutory employee filing Schedule C. If any of the follow- ing situations apply to you, read the paragraph and then complete EIC Worksheet B. Net earnings from self-employment of $400 or more. If your net earnings from self-employment are $400 or more, be sure to correctly fill out Schedule SE (Form 1040) and pay the proper amount of self-employ- ment tax. If you don't, you may not get all the EIC you are entitled to. When figuring your net earnings from self-employ- ment, you must claim all your allowable business expenses. When to use the optional methods of figuring net earnings. Using the optional methods on Schedule SE to figure your net earnings from self-employment may qualify you for the EIC or give you a larger credit. If your net earnings (without using the optional methods) are less than $5,880, see the instructions for Schedule SE for de- tails about the optional methods. When both spouses have self-employment in- come. You must complete both Parts 1 and 2 of EIC Worksheet B if all of the following conditions apply to you. 1. You are married filing a joint return. 2. Both you and your spouse have income from self-em- ployment. 3. You or your spouse file a Schedule SE and the other spouse doesn't file Schedule SE. Statutory employees. Statutory employees report wa- ges and expenses on Schedule C. They don't file Sched- ule SE. If you are a statutory employee, enter the amount from line 1 of Schedule C in Part 3 when you complete EIC Worksheet B. Schedule EIC You must complete Schedule EIC and attach it to your tax return if you have a qualifying child and are claiming the EIC. Schedule EIC provides the IRS with information about your qualifying children, including their names, CAUTION ! Chapter 4 Figuring and Claiming the EIC Page 21