Q1. What is the advance Tax Credit (advance EITC)?
A1. The advance EITC allows those taxpayers who expect to qualify for the Earned Income Tax Credit (EITC) and have at least one qualifying child to receive part of the credit in each paycheck during the year the taxpayer qualifies for the credit.
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Q2. Why should I be interested in the advance EITC?
A2. If you are working and
1. you expect your 2004 income will be below approximately $30,300 ($31,300 if married filing jointly),
2. you expect to have at least one qualifying child, and
3. you expect to qualify for the EITC, you can choose to get part of the credit with your paycheck..
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Q3. How do I get advance EITC payments?
A3. See if you qualify for advance EITC payments by completing the five questions on the back of 2004 Form W-5, Earned Income Credit Advance Payment Certificate, available here or through your employer.
If you qualify, complete the bottom part of the Form W-5 and give it to your employer. Then, based on your income, your employer adds additional money to your take-home pay in each paycheck.
If your only income is from self-employment, you cannot qualify for advance EITC payments.
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Q4. Could my advance EITC payments change?
A4. Yes, if during the year, your income rises above the dollar limit, or you no longer qualify for the EITC, you need to fill out a new Form W-5 and give it to your employer to stop the advance payments.
If you no longer qualify for the advance EITC, you will have to repay all advance EITC money when you file your tax return.
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Q5. If I get the advance EITC do I have to file a tax return?
A5. Yes. If you receive the advance EITC, you must file a tax return. The Form W-2 provided by your employer will show the amount of the advance EITC you received. This amount must be reported on your tax return. You will also be able to claim any additional credit to which you may be entitled.
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Q6. Where can I get more information on the EITC and advance EITC?
A6. Publication 596, Earned Income Credit, explains the rules to qualify for and to claim the EITC and advance EITC.
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