Employees Eligible for Earned Income Credit Advanced Payment - March 25, 2004

The federal government has implemented a program to aid low income workers to speed up the process of receiving their earned income credits as opposed to receiving them after filing EIC on their tax return. The process for employees to follow is to have them fill out IRS Form W-5. An employee is eligible for EIC if they answer yes to the following three questions.

1. Do you have a qualifying child?

2. Will your earned income and AGI be less than $30,338 (or $31,338 if filing a joint return)?

3. Are you able to claim EIC in 2004?

The W-5 Forms expire on December 31 of each calendar year, so each employee will need to fill out the forms yearly. The maximum an employee can receive in the advance payments per calendar year is $1563, ($781.50 if married and both spouses filing W-5). If an employee’s financial or personal situation changes throughout the year, a new Form W-5 will need to be filled out by the employee. If it is determined that the employee is no longer eligible for EIC, they will need to pay the advanced payments that they have received back to the IRS when filing their 2004 tax return.

If an employee qualifies, they need to complete the bottom part of the Form W-5. Then, based on the employees income, the employer adds additional money to the take-home pay in each paycheck.

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