Chapter 6.
Advance Payment of EIC in 2007
This is archived information that pertains only to the 2006 Tax Year. If you
are looking for information for the current tax year, go to the Tax Prep Help Area.
You can receive part of your 2007 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 (2007) 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 2008 when you file your tax return for the
year 2007. 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.
In March of 2007, 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 2007. 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 2006 tax return. This chapter is about
the EIC you
expect
to claim on your 2007 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.”
Do you expect to have a qualifying child? (See the definition of qualifying child beginning on page 12.)
Go to
Question 2.You cannot get advance payments of the EIC.
Do you expect that your adjusted gross income (AGI) and earned income will each be less than $33,241 ($35,241 if you expect
to file a
joint return for 2007)?
Go to
Question 3.You cannot get advance payments of the EIC.
Do you expect to be eligible for the EIC in 2007 as explained in chapters 1, 2, 3, and 4?
Go to
Step 2.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 2007, except that you will be allowed
to have more earned income and
adjusted gross income and up to $2,900 of investment income. Also, the rule described in chapter 2 for students affected by
Hurricane Katrina, Rita,
or Wilma will no longer apply.
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 2007.
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.
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 2008 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 51.
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 2007 Form W-5 you give to your employer is valid until December 31, 2007. If you expect to be eligible for EIC
in 2008 and you want to receive
advance payments, you must give your employer a new Form W-5 in 2008. 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 2007.
Step 3. How To Report Advance Payments of EIC
If you received advance payments of EIC in 2006, see Reporting advance payments of EIC received in 2006 on page 3 for information on
reporting these payments.
If you receive advance payments of EIC in 2007, you must file a 2007 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 2007, 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.
You cannot use Form 1040EZ to report your advance payments. You must file Form 1040 or Form 1040A.
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