Advance Earned Income Credit

This is archived information that pertains only to the 2004 Tax Year. If you
are looking for information for the current tax year, go to the Tax Prep Help Area.

If you expect to qualify for the earned income credit in 2005, you may be able to start getting part of the credit with your pay now, instead of waiting until you file your 2005 tax return in 2006. This is called Advance Earned Income Credit or Advance EIC.

To receive part of the credit with your pay, you must expect to have at least one qualifying child for 2005, expect to fall within certain income limits, and expect to meet certain other conditions. You cannot get the Advance EIC if you do not expect to have a qualifying child, even if you expect to be eligible to claim the EIC on your 2005 return. To see if you qualify, ask your employer for the 2005 Form W-5(PDF), Earned Income Credit Advance Payment Certificate.

If you qualify, complete Form W–5 and give it to your employer. Your employer will then add the advance earned income credit to your net pay each pay period you are eligible.

You may have only one Form W–5 in effect with a current employer at one time. If you and your spouse are both employed, each of you should file a separate Form W–5.

If your situation changes after you give your employer Form W–5, you must give your employer a new Form W–5. For example, you should give your employer a new Form W–5 if you no longer expect to qualify for the EIC or you no longer want to get advance payments of the credit with your pay.

Remember, if you receive the EIC with your pay during 2005, you must file Form 1040A(PDF) or Form 1040(PDF) for 2005 to report the advance payments you received during the year and to take advantage of any remaining credit. You cannot use Form 1040EZ(PDF). The total of the advance payments you receive will be shown on your 2005 Form W–2.

The 2005 Form W–5 expires on December 31, 2005. If you expect to be able to claim the credit in advance for 2006, you must give a completed 2006 Form W–5 to your employer.

For information on who can claim the EIC for 2005, refer to Topic 601, Publication 596 and Form 1040(PDF) Schedule EIC.

If you are an employer and want more information about the advance payment and how it affects you, refer to Topic 754.