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Publication 596 2008 Tax Year

Chapter 6.   Advance Payment of EIC in 2008

Table of Contents

You can receive part of your 2008 EIC in your paycheck by completing a form and giving it to your employer.

Do you expect to be eligible for the EIC this year (2008) and to have a qualifying child? If so, you can choose to get payments of the EIC in your paycheck now instead of waiting to get your EIC all at once in 2009 when you file your tax return for the year 2008. These payments are called advance EIC payments. This chapter explains how you may be able to get them this year and how to report them on your tax return.

Example.

Example:

How advance payment of EIC works
  In March of 2008, John and Tom worked together. Tom told John that he gets $40 added to his paycheck each month because of the earned income credit. John would like to get an extra amount every month too. John needs to find out if he can claim the EIC in 2008. He should answer the questions in Step 1 below and then, if he is eligible for advance EIC payments, go to Step 2.

Note.   Chapters 1 through 5 of this publication are about the EIC you claim on your 2007 tax return. This chapter is about the EIC you expect to claim on your 2008 tax return.

Step 1. Find Out If You Are Eligible for Advance Payments of the EIC

Answer the following three questions to see if you are eligible for advance payments of the EIC.

Note. When the question says “expect,” you do not have to know that you will be able to answer “Yes” when you file your tax return. You can only make a best guess that you will be able to answer “Yes.”

Question 1.

Do you expect to have a qualifying child? (See the definition of qualifying child beginning on page 12.)

[ ]
Yes.
Go to Question 2.
[ ]
No.
Stop
You cannot get advance payments of the EIC.

Question 2.

Tip:

AGI and earned income are explained on pages 5, 9, and 22.

Do you expect that your adjusted gross income (AGI) and earned income will each be less than $33,995 ($36,995 if you expect to file a joint return for 2008)?

[ ]
Yes.
Go to Question 3.
[ ]
No.
Stop
You cannot get advance payments of the EIC.

Question 3.

Tip:

If you are a farm worker paid on a daily basis, your employer is not required to pay you advance EIC. Also, you generally cannot get advance EIC unless your wages are subject to federal income tax, social security tax, or Medicare tax withholding.

Do you expect to be eligible for the EIC in 2008 as explained in chapters 1, 2, 3, and 4?

[ ]
Yes.
Go to Step 2.
[ ]
No.
Stop
You cannot get advance payments of the EIC. Read the rules in chapters 1, 2, 3, and 4 and/or the instructions for Form W-5. Then answer “Yes” or “No.”
Note.   The rules in chapters 1, 2, 3, and 4 are expected to be basically the same for 2008, except that you will be allowed to have more earned income, more adjusted gross income, and up to $2,950 of investment income.

Step 2. Complete Form W-5 and Give It to Your Employer

If you answered “Yes” to all the questions in Step 1, and you wish to get part of your EIC now, you must give your employer a Form W-5 for 2008.

After you have read the instructions and completed Form W-5, give the lower part of the form to your employer. Keep the top part for your records. A part of a blank Form W-5 is shown here.

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You may get only part of your EIC during the year in advance payments. You will get the rest of the EIC you are entitled to when you file your tax return in 2009 and claim the EIC.

Frequently Asked Questions About Form W-5

1. How do I get Form W-5?   Ask your employer for the form. Or, see How To Get Tax Help on page 49.

2. What should I do if I have more than one employer?   Give a Form W-5 to only one employer.

3. Can I give my employer a Form W-5 if my spouse has given her employer a Form W-5?   Yes.

4. How often do I have to file Form W-5?   The 2008 Form W-5 you give to your employer is valid until December 31, 2008. If you expect to be eligible for EIC in 2009 and you want to receive advance payments, you must give your employer a new Form W-5 in 2009. Do this each year you expect to be eligible for the EIC.

5. What should I do if my situation changes after I give Form W-5 to my employer?   Give your employer a new Form W-5 if any situation shown in the following table applies to you for 2008.

Table 3. Changes to Advance EIC Status
IF.... THEN you must give your employer a new Form W-5.To indicate your change, check
You no longer expect to have a qualifying child “No” on line 1.
You no longer expect to be eligible for the EIC “No” on line 1.
You no longer want advance payments “No” on line 1.
Your spouse files Form W-5 with his or her employer “Yes” on line 3.

Step 3. How To Report Advance Payments of EIC

If you received advance payments of EIC in 2007, see Reporting advance payments of EIC received in 2007 on page 3 for information on reporting these payments.

If you receive advance payments of EIC in 2008, you must file a 2008 tax return (even if you would not otherwise have to file) to report the payments and claim any additional EIC. Box 9 of your Form W-2 will show the amount you received. See the instructions for Form 1040 or Form 1040A for the line number on which you report advance payments of EIC.

If you receive advance payments of EIC in 2008, and you later find out that you are not eligible for some or all of them, you still must report them on your tax return.

Caution
You cannot use Form 1040EZ to report your advance payments. You must file Form 1040 or Form 1040A.

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