Tax Credit Program Forms FAQ's
 

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What is the Earned Income Tax Credit?

The EITC is a special tax benefit for working people who earn low or moderate incomes to reduce their tax burden. Workers who qualify for the EITC and file a Federal tax return can get back some or all of the Federal income tax that was withheld from their pay during the year. They may also get extra cash back from the Internal Revenue Service (IRS). Workers whose earnings are too small to have paid taxes may also receive the EITC.
  

Who is eligible for the EITC and how much is it worth?

Workers with one child at home and a family income of less than $29,201 in 2002 may receive an EITC of up to $2,428.   Workers with more than one child at home and a family income of less than $33,178 in 2002 may receive an EITC of up to $4,008. Workers who do not have children at home, are age 25-64 on December 31, 2002, and have an income below $11,060 may receive an EITC of up to $364.
  

What is meant by "qualifying children?"

"Qualifying children" include: sons, daughters, stepchildren, grandchildren and adopted children, as long as they lived with the taxpayer for over six months. Brothers, sisters, stepbrothers, stepsisters, nieces, nephews or foster children can be "qualifying children" if they lived with the taxpayer all year and were cared for as members of the family. "Qualifying children" must be under age 19, or under age 24 if they are full-time students. Totally and permanently disabled children of any age are considered "qualifying children." A valid Social Security number is required for any qualifying child.
  

How does the EITC work?

Workers who qualify for the EITC can get checks from the IRS after filing their tax returns. For those who don't owe any Federal income tax but file correct tax returns, the IRS will send checks for the EITC amounts due. Eligible workers may also pay less in taxes when their tax return is due.
  

How do you get the EITC?

Workers raising children in 2002 must file either Form 1040 or 1040A and must fill out and attach Schedule EIC. Workers with children cannot get the EITC if they file their tax return with Form 1040EZ or fail to attach Schedule EIC. Workers using the "married filing separately" status cannot get the EITC. Workers who were not raising children in 2002 can file any tax form-including the 1040EZ. They do not need to file Schedule EIC.
  

Does the EITC affect public assistance benefits?

In most cases, the EITC does not affect eligibility for benefits like Medicaid, Food Stamps, SSI, or public or subsidized housing.
  

Can immigrant workers get the EITC?

Many legal immigrants can qualify for the EITC, as long as they meet the eligibility requirements.
  

What is the Advance EITC payment?

Workers may choose to get a portion of the EITC as advance payments in their regular paychecks and the remainder of the credit after filing a tax return. This is the Advance Earned Income Tax Credit (AEITC). In 2002 Advance EITC payments are available to any worker with at least one qualifying child who expects his/her 2002 income to be less than $29,201 ($30,201 if married filing jointly). The advance EITC is not available for workers who are not raising children in their homes.
  

How does an employee apply for the AEITC?

Eligible workers should request a W-5 form (called the "Earned Income Credit Advance Payment Certificate") from their employers. They then fill out the W-5 form and give the bottom part to their employers. Eligible workers can file a W-5 at any time during the year, but they must file a new W-5 at the beginning of each year to continue getting the EITC in their paychecks. Workers planning to get married or expecting a large increase in income during the year should file a new W-5 form with their employers to stop the advance payments. Married workers can choose advance payments, but if they do, both spouses should give a W-5 to their employers. Workers who get advance payments during the year must file a tax return after the end of the year and include the total amount received in advance payments. They must also complete their own Schedule EIC and attach it to their tax returns.
  

Are some workers not eligible to use the Advance EITC?

	Workers who are not eligible are:
			without qualifying children
			farm workers who get paid day by day
			people with no Social Security and Medicare taxes withheld from their pay
			self-employed workers (who cannot advance the EITC to themselves).

Although employers are required to participate if employees file W-5 forms with them for the AEITC, employers do not pay for the AEITC. They simply subtract the advance payments they have added to their workers' paychecks from the total taxes withheld from all employees that would normally be deposited with the IRS. The advance payments are easily programmed into automated payroll systems.
  

No. It is the employee's responsibility to provide accurate information to the employer.
  

The advance payment procedure has built-in protections against overpayment. Normally, workers who choose advance payment get about half or less of the EITC amount they're entitled to for the year. They get the rest as a refund when they file their tax returns. This means workers can get advance payments and a year-end refund. Because workers receive only part of their EITC during the year, they're protected against getting too much in advance.