Advance Earned Income Tax Credit
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What is the Advance Earned Income Credit?
The Advance EIC is a way for you to get your Earned Income Credit in your take-home pay throughout the year rather than getting the EIC in one payment at tax time. You may be eligible for the Advance EIC if you have at least one qualifying child and you expect to claim the EIC on your tax return next year.
If you qualify for the Advance EIC, your employer will add part of your EIC payment to each of your paychecks throughout the year. You will not have to wait until next year when you file your income tax return to get your Earned Income Credit payment.
Having the Advance EIC added to your paychecks can make it easier for you to pay your bills and other expenses during the year. Advance EIC payments are not taxable, and do not count as income in determining your eligibility for benefit programs such as SNAP food stamps, MassHealth, TAFDC, or Section 8.
Am I eligible?
Not everyone who expects to claim the Earned Income Credit is eligible for the Advance EIC.
For tax year 2010, you are eligible for the Advance EIC if:
- you have (or will have) at least one qualifying child during the tax year
- you expect to have less than $35,535 ($40,545 if married filing jointly) of earned income and adjusted gross income
- you expect to be able to claim the Earned Income Credit on your 2010 income tax return
(see the questions on the back of Form W-5 to find out if you are likely to be able to claim the EIC)
- you (and your spouse, if married filing jointly) have valid Social Security numbers
You cannot get Advance EIC payments if the only income you have is from self-employment.
How much Advance EIC will I get?
In most cases, you are allowed to get only a portion of your total expected Earned Income Credit in advance. This is to protect you from accidentally getting too much advance EIC during the year and then having to pay some of it back when you file your tax return. If you do not get all of your EIC in advance, you will get the rest as a refund payment when you file your income tax return.
There is a limit on the total advance EIC anyone can get during the year. For 2010, the limit is $1830 in advance EIC payments.
How do I get the Advance EIC?
To apply for advance EIC payments you must complete Form W-5 (Earned Income Credit Advance Payment Certificate) and give it to your employer. Form W-5 includes a questionnaire to let you know if you are eligible for the Advance EIC.
You can get Form W-5:
- online at the IRS web site: Form W-5
- by calling the IRS at 1-800-TAX-FORM
- or from your employer
You can give Form W-5 to your employer at any time during the year. You must file a new Form W-5 at the beginning of each year.
Your employer will calculate your advance EIC payments and add them to your paychecks.
What are the rules about the Advance EIC?
If you get the advance EIC:
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You must give your employer a new Form W-5 each year.
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If you have more than one employer, you should only complete one Form W-5.
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If you are married, and both you and your spouse are working, both of you should file a Form W-5. Make sure you put a check in the box on the form indicating that both of you have filed a Form W-5.
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You should file a new W-5 with your employer if your situation changes during the year:
- if you no longer expect to have a qualifying child
- if you no longer expect to be eligible for the EIC
- if your spouse files a W-5
- if you do not want to get advance EIC payments any more
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If you get the Advance EIC, you must file a federal income tax return to report the advance payments and claim any additional EIC you might be owed. You must file a return even if you would otherwise not have to file.
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When you file your tax return, you must use Form 1040A or Form 1040 and attach Schedule EIC. You cannot use Form 1040EZ to report advance EIC payments.
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If your advance EIC payments exceed your Earned Income Credit, you must pay back the extra to the IRS.
Where can I find more information about the Advance EIC?
For more information about the Advance EIC, see:
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Advance Earned Income Tax Credit Questions and Answers
Answers to commonly asked questions about the Advance EIC. From the IRS.
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Advance Payment of EIC in 2010 (IRS Publication 596, Chapter 6)
Examples and instructions about applying for the Advance EIC. From the IRS.
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Form W-5 Instructions and Certificate
Detailed information about eligibility and how to apply for the Advance EIC. Includes the W-5 Earned Income Credit Advance Payment Certificate and EIC eligibility questionnaire.
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