Millions of Americans forgo critical tax relief each year by failing to claim the Earned Income Tax Credit (EITC), a federal tax credit for individuals who work but do not earn high incomes. Taxpayers who qualify and claim the credit could pay less federal tax, pay no tax or even get a tax refund.

In 2004, an estimated 21 million taxpayers received approximately $37.5 billion in EITC. However, the IRS estimates that 25 percent of people who qualify don´t claim the credit and at the same time, there are millions of Americans who have claimed the credit in error, many of whom simply don´t understand the criteria.

EITC is based on the amount of your earned income and the number of qualifying children in your household. If you have children, they must meet the relationship, age and residency requirements. And, you must file a tax return to claim the credit.

If you were employed for at least part of 2004, you may be eligible for the EITC based on these general requirements:

• You earned less than $11,490 ($12,490 if married filing jointly) did not have any qualifying children, and were at least age 25 but under age 65, or
• You earned less than $30,338 ($31,338 if married filing jointly) and have one qualifying child, or
• You earned less than $34,458 ($35,458 if married filing jointly) and have more than one qualifying child.

There's a lot to know about qualifying for EITC, and this year, the EITC Assistant — a new tool on the IRS Web site — will help take the guess work out of the eligibility rules and make this determination easier. Just answer a few simple questions about yourself, your children, your living situation and your income, to find out if you are likely to qualify for the EITC. You will see the results of your responses right away on your computer screen. Taxpayers, tax professionals, employers, and community and public service organizations are encouraged to use the EITC Assistant on IRS.gov which is available in both English and Spanish.

Information about the EITC rules is also available in Publication 596, Earned Income Credit. It contains eligibility criteria and instructions for claiming the tax credit. Copies of the publication are available in English and Spanish on IRS.gov or by calling 1-800-TAXFORM (1-800-829-3676).

You may be able to get EITC payments in advance — in each paycheck — rather than waiting until tax time to claim the credit. To qualify for EITC advance payments, you must work and receive taxable wages, and have at least one qualifying child for 2005. If you would like to participate for 2005, give your employer a Form W-5, Earned Income Credit Advance Payment Certificate, and your employer will be able to include part of the credit regularly in your pay check.

If you received advance EITC payments in 2004, you must file an income tax return to report the payments. Report the amount on line 60 (Form 1040) or line 37 (Form 1040A). Your W-2 form will show the amount of your advance EITC payments in box 9. You cannot use a Form 1040-EZ to report advance payments.

You may be able to get free assistance in preparing your federal tax return from one of the local volunteer tax assistance programs, such as Volunteer Income Tax Assistance (VITA), Tax Counseling for the Elderly (TCE), or the Military VITA Program for armed forces members and families. To obtain the location, dates and hours of the volunteer site closest to you, call the IRS toll-free at 1-800-829-1040.

Additionally, you may be one of millions of taxpayers who will be able to prepare and file their 2004 federal tax returns electronically this year — for free. The IRS and the Free File Alliance, LLC, a private-sector consortium of tax software companies, have formed a partnership to help qualifying taxpayers electronically prepare and file their federal tax returns for free. See the Free File home page for more information.