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 2001, you can choose to get part of the credit in advance. Give your employer a 2001 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 2000 was $27,413. The amount for 2001 will be higher. (See the 2001 Form W-5 for the 2001 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 2001

To get part of the credit in advance, you must fill out a 2001 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 2001, you must file Form 1040 or Form 1040A for tax year 2001. 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 2001 Form W-5 you give to your employer is valid until December 31, 2001. If you expect to qualify for the earned income credit in 2002 and you want to receive advance payments, you must give your employer a new Form W-5 in 2002. 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 2000

If you received advance payments of the earned income credit in 2000, you must file a tax return to report the payments. Report the amount on line 55 (Form 1040), or line 34 (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 Eligibility Checklist

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