The Earned Income Tax Credit (EITC), sometimes called the Earned Income Credit (EIC), is a refundable Federal income tax credit for low-income working individuals and families. Congress originally approved the tax credit legislation in 1975 in part to offset the burden of social security taxes and to provide an incentive to work. The credit reduces the amount of Federal tax owed and can result in a refund check. When the EITC exceeds the amount of taxes owed, it results in a tax refund to those who claim and qualify for the credit.

Income and family size determine the amount of the EITC. To qualify for the credit, both the earned income and the adjusted gross income for 2003 must be less than $29,666 for a taxpayer with one qualifying child ($30,666 for married filing jointly), $33,692 for a taxpayer with more than one qualifying child ($34,692 for married filing jointly), and$11,230 for a taxpayer with no qualifying children ($12,230 for married filing jointly). The EITC Eligibility Checklist on the last page of IRS' Publication 596, Earned Income Credit, may be used to quickly determine eligibility for the credit.

The taxpayer may figure the credit by using a special worksheet included as part of the EITC instructions in the 1040, 1040A, and 1040EZ tax packages. Instructions in these packages require some taxpayers to use a worksheet in Publication 596 instead of the worksheet in the tax package.

For 2004, some employees with at least one child living with them may be entitled to receive advance EITC payments in their paychecks. The employee must file Form W-5, Earned Income Credit Advance Payment Certificate, with an employer to receive the advance payments. The employer then pays part of the credit to the employee in advance throughout the year. The taxpayer claims the rest when filing the 2004 Federal tax return.

The EITC does not generally affect eligibility for Medicaid, Supplemental Security Income (SSI), food stamps, or low-income housing.

This web site provides specific information on the EITC Program, including Publication 596. Taxpayers may figure the EITC themselves, have the IRS figure the EITC by following instructions on pages 21 and 22 of Publication 596, use the services of a tax professional, or get assistance from a Volunteer Income Tax Assistance (VITA) site. To find their closest VITA site, taxpayers may call the IRS at 1-800-829-1040.

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