Advance Earned Income Credit

Would you like to get part of your earned income credit now instead of waiting until after the end of the year? If you work for someone and expect to qualify for the earned income credit in 2002, you can choose to get part of the credit in advance. Give your employer a 2002 Form W-5, Earned Income Credit Advance Payment Certificate, and your employer will include part of the credit regularly in your pay. The advance payment is only available if you have at least one qualifying child.

Who can get the advance payment of the earned income credit? To get part of the earned income credit paid to you throughout the year in your paycheck, you must meet all the following rules.

1. You must expect that your earned income and modified AGI will each be less than a certain amount. The amount in 2001 was $28,281. The amount for 2002 will be higher. (See the 2002 Form W-5 for the 2002 amount.)
2. You must have a qualifying child.
3. You must expect to meet all the rules in Parts A, B, and D of this chapter or in the instructions for Form W-5.

Persons who are not entitled to receive advance payments. Under certain circumstances, even if you meet these rules, you may not be entitled to get EIC. If your wages are not subject to federal income tax, social security tax, or Medicare tax withholding, you cannot get the advance payment of the earned income credit. If you are a farm worker and are paid on a daily basis, your employer is not required to pay you the advance amount of the credit.

How To Get Advance Payments for 2002

To get part of the credit in advance, you must fill out a 2002 Form W-5. After you have read the instructions and answered the questions on Form W-5, give the lower part of the form to your employer. Keep the top part for your records.

More than one employer. If you have more than one employer, give a certificate to only one of them. If you are married and both you and your spouse are employed and expect to qualify for the credit, you may give a Form W-5 to your employer and your spouse may give one to his or her employer.

If you receive advance earned income credit payments in 2002, you must file Form 1040 or Form 1040A for tax year 2002. You must file a return to report what you already received and to take advantage of any additional earned income credit that you may qualify for.

Receipt of advance payments you do not qualify for. If you receive advance payments and later find out that you do not qualify for the EIC, you will have to pay back any advance payment you are not entitled to when you file your Form 1040 or Form 1040A.

When to give your employer a new Form W-5. The 2002 Form W-5 you give to your employer is valid until December 31, 2002. If you expect to qualify for the earned income credit in 2003 and you want to receive advance payments, you must give your employer a new Form W-5 in 2003. Do this each year you think you are eligible for the credit.

If you no longer want to get advance payments or if your situation changes and you no longer qualify for the earned income credit, you must give your employer a new Form W-5. Check the No box on line 1 of the new form.

If your spouse files a Form W-5 with his or her employer, you must file a new Form W-5 with your employer. Check the Yes box on line 4.

Advance Payments Received in 2001

If you received advance payments of the earned income credit in 2001, you must file a tax return to report the payments. Report the amount on line 56 (Form 1040), or line 35 (Form 1040A). Your Form W-2, box 9, will show the amount you received.

You cannot use Form 1040EZ to report your advance payments.

EIC worksheet-Kelly

EIC Eligibility Checklist

You may claim the EIC if you answer YES to all the following questions.*
			YES	NO
1.	Do you, your spouse, and your qualifying child each have a valid SSN? (See Rule 1.)
2.	Is your filing status married filing jointly, head of household, qualifying widow(er), or single? (See Rule 2.) Caution: If you are a nonresident alien, answer YES only if your filing status is married filing jointly and you are married to a U.S. citizen or resident alien. (See Rule 3.)
3.	Answer YES if you are not filing Form 2555 or Form 2555-EZ. Otherwise, answer NO. (See Rule 4.)
4.	Is your investment income $2,450 or less? (See Rule 5.)
5.	Is your total earned income at least $1 but less than: $10,710 if you do not have a qualifying child. $28,281 if you have one qualifying child, or $32,121 if you have more than one qualifying child? (See Rules 6 and 14.)
6.	Is your modified AGI less than: $10,710 if you do not have a qualifying child. $28,281 if you have one qualifying child, or $32,121 if you have more than one qualifying child? (See Rule 15.)
7.	Answer YES if you (and your spouse if filing a joint return) are not a qualifying child of another person. (See Rules 9 and 12.)
	STOP	If you have a qualifying child, answer questions 8 and 9 and skip 10-12. If you do not have a qualifying child, skip answers 8 and 9 and answer 10-12.*
8.	Does your child meet the age, residency, and relationship tests for a qualifying child? (See Rule 7.)
9.	Is your child a qualifying child only for you? Answer YES if your qualified child is also a qualifying child for another person but your modified AGI is higher than the other person's. (See Rule 8.)
10.	Was your main home (and your spouse's if filing a joint return) in the United States for more than half the year? (See Rule 13.)
11.	Were you (or your spouse if filing a joint return) at least age 25 but under 65 at the end of 2001? (See Rule 10.)
12.	Answer YES if you (and your spouse if filing a joint return) cannot be claimed as a dependent on anyone else's return. Answer NO if you (and your spouse if filing a joint return) can be claimed as a dependent on someone else's return. (See Rule 11.)
*	PERSONS WITH A QUALIFYING CHILD: If you answered YES to questions 1 through 9, you can claim the EIC. Remember to fill out Schedule EIC and attach it to your Form 1040 or Form 1040A. You cannot use Form 1040EZ.
	PERSONS WITHOUT A QUALIFYING CHILD: If you answered YES to questions 1 through 7, and 10 through 12, you can claim the EIC.
	If you answered NO to any question that applies to you: You cannot claim the EIC.

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