Advance Earned Income Tax Credit Questions and Answers |
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Q1. What is the advance Earned Income Tax Credit (Advance EITC)?
A1. The advance EITC allows 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. The credit is sometimes called the AEITC.
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Q2. Why should I be interested in the advance EITC?
A2. You can choose to get part of the credit in your paycheck, if
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you are working;
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you expect your adjusted gross income (AGI) and earned income will fall within the income limits for the year;
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you expect to have at least one qualifying child; amd
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you expect to qualify for the EITC.
Your employer will put a part of the EITC in your paychecks but there is a maximum amount that can be paid during the year.
Note: You may be able to claim a larger credit when you file your tax return because your employer can only pay a part of the credit to you in your paycheck. Also, you may be able to claim a larger credit if you have more than one qualifying child. But you must file your tax return to claim any additional credit.
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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 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.
If you received advance payments of EIC, you must file Form 1040 or Form 1040A to report the payments. Your Form W-2, box 9, will show the amount you received.
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Page Last Reviewed or Updated: December 08, 2008