Advance Payment Option (federal EIC only)

Most workers get the federal EIC in one large check from the IRS after they file a tax return. But there is another choice: employers can add part of a worker's federal EIC to every paycheck, and the worker gets the rest of the credit after filing a tax return. This is the "advance EIC payment."

In 2007, advance EIC payments are available to any worker with at least one qualifying child who expects year 2007 income of less than $33,000 (or $35,000 for married workers). The credit for workers who are not raising children in their home is not available in advance payments. In 2008, Advance EIC payments will be available to any worker with at least one qualifying child who expects 2008 income of less than $34,000 (or $37,000 for married workers).

The advance EIC payment can make an important difference for many workers, allowing them to pay the rent, buy groceries, cover child care expenses, and meet other day-to-day needs. For example, a worker earning between $490 and $1,300 a month can get about $50 or $60 extra in each bi-weekly paycheck.

Some workers should not choose advance EIC payment. Advance EIC payments are based on the total income workers expect their families to earn in a year. Changes in income or family size during the year can decrease the EIC for which the workers are eligible. If a worker continues to receive advance payments based on an incorrect estimate of yearly income, these payments may exceed the amount of the EIC. In this case, the worker would have to send the IRS a check at tax time to make up the difference. The following workers should not use the advance payment option:

• Workers who hold more than one job.
  
• Workers whose earned income increases a lot during the year.
  
• Workers with a working spouse.
  
• Workers who get married during the year.

How Workers Get the Advance EIC Payment : Getting the advance EIC payments in not hard. Eligible workers fill out a W-5 form called the "Earned Income Credit Advance Payment Certificate" and give the bottom part to their employer. The W-5 is available from employers or from the IRS by calling 1-800-TAX-FORM.

Eligible workers can file a W-5 at any time during the year, but they must file a new W-5 at the beginning of each year to continue getting the advance EIC payment in their paychecks.

If workers who are planning to get married or expect a large increase in income during the year, they should ask their employer to stop putting the advance EIC payments in their paychecks. To do this, workers file a new W-5 form with their employer and indicate that they don't want to receive the advance EIC payments anymore.

Workers who get advance EIC payments during the year must file a tax return after the end of the year and include the total amount received in advance payments. They must also complete Schedule EIC and attach it to their tax return.

Note: In most cases, the EIC does not affect eligibility for benefits like cash assistance, Medicaid, Food Stamps, SSI, or housing assistance. Advance EIC payments do not change the workers gross income (only their bi-weekly take-home pay) and therefore should not change this situation. However, DSS staff members and other service coordinators may want to be watchful of any unwarranted determination of ineligibility triggered by advance EIC payments.

Some Workers Aren't Eligible for Advance EIC Payments:

Some workers who are eligible for the EIC are not allowed to get advance payments, including:

• Workers without qualifying children.
  
• Farmworkers who get paid by the day
  
• People with no Social Security and Medicare taxes witheld from their pay.

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