Need more money? Consider the Advance Earned Income CreditThe Internal Revenue Service today reminded low- to moderate-income taxpayers in Minnesota that they may be eligible for the Advance Earned Income Credit (EIC), a tax credit filers can get right now in their pay.
The Internal Revenue Service today reminded low- to moderate-income taxpayers in Minnesota that they may be eligible for the Advance Earned Income Credit (EIC), a tax credit filers can get right now in their pay.
Those who qualify for the Advance EIC could receive as much as $1,750 of their full credit this year instead of waiting to get it after they file a 2008 tax return next year. The maximum credit is more than $4,800.
The IRS estimates that 20 to 25 percent of people who qualify for this credit do not claim it at all. For tax returns that were filed in 2007, about 282,000 Minnesotans took the EIC, claiming more than $474 million.
To receive part of the EIC in their pay, filers must expect to have at least one qualifying child for the current year, expect to fall within certain income limits, and meet certain other conditions.
About the credit
The Earned Income Credit is a federal tax credit for working individuals and families. Congress originally approved the legislation in 1975 in part to provide an incentive to work. When the EIC exceeds the amount of taxes a person owes, it can even provide a refund. To qualify, taxpayers must file a tax return, even if they did not earn enough money to be obligated to file, and have an adjusted gross income in 2008 of less than:
•?$38,646 ($41,646 married filing jointly) with two or more qualifying children; or
•?$33,995 ($36,995 married filing jointly) with one qualifying child.
Qualifying taxpayers age 25 to 65 with no qualifying children are not eligible for the Advance EIC even if they expect to be eligible for the EIC on their 2008 tax return with income of less than $12,590 ($14,590 married filing jointly).
How to get Advanced EIC
Taxpayers should get a current year Form W-5, Earned Income Credit Advance Payment Certificate, from their employer, then complete and return it. The employer will then add the Advance EIC to the person’s net pay if they qualify. Employers can find help at IRS.gov by searching “EITC information for employers.”
After getting Advanced EIC
Regularly evaluate income and eligibility. If a taxpayer no longer expects to qualify for the EIC, they must give the employer a new Form W-5. Taxpayers who become ineligible for the EIC during the year and do not complete a new Form W-5 would need to repay Advance EIC money when they file their tax return.
Complete a new Form W-5 every year. The Form W-5 expires on December 31 each year.
Use the correct tax form. Filers who get the Advance EIC in their pay must file Form 1040A or Form 1040 (not 1040EZ) for tax year 2008 to report the advanced payments and to take advantage of any remaining credit.
For more information,?see IRS Publication 596, Earned Income Credit, available in English and Spanish. It and Form W-5 can be downloaded from IRS.gov or ordered from 800-TAX-FORM (800-829-3676).