Earned Income Credit

The earned income credit (EIC) is a refundable credit. This credit is designed for certain people who work and have less than $37,263 in earned income. The IRS aggressively pursues individuals who attempt to take this credit when they are not qualified for it. If you have a qualifying child, the amount of the credit will be greater. The amount you can receive depends on your level of income and the number of qualifying children. It can be as high as $4,400.

If you expect to qualify for the EIC in the following year, you may receive an advance payment of the credit in your paycheck. If you qualify you should give your employer a completed Form W-5. You are eligible for advance payments if:

• You expect your earned income and AGI will be less than $32,001 ($34,001 if you file a joint return)
• You expect to have a qualifying child.
• You expect to meet all the rules to qualify for EIC.

There are four sets of rules for the EIC. The first set, Part A rules, apply to everyone.

1. Your adjusted gross income (AGI) must be less than

• $35,263 ($37,263 if married filing jointly) with more than 1 qualifying child
• $31,030 ($33,030 if married filing jointly) with 1 qualifying child
• $11,750 ($13,750 if married filing jointly) with no qualifying child.

2. You must have a valid social security number.
3. You filing status cannot be married filing separately.
4. You must be a citizen of the United States or resident alien for the entire year.
5. You cannot file Form 2555 or Form 2555-EZ.
6. Your investment income must be $2,700 or less.
7. You must have earned income. Earned income is wages, salaries, or earnings from self-employment.

Part B rules apply only if you have a qualifying child.

8. You child must meet the relationship, age, and residency tests

• Relationship test - A child must be your son, daughter, stepchild, eligible foster child or a descendent of any of them OR your brother, sister, half brother or sister, stepbrother or sister, or a descendent of any of them.
• Age test - A child must be under age 19 at the end of the year; a full time student under at 24 at the end of the year; or permanently and totally disabled at any time during the year.
• Residency test - A child must have lived with you in the United States for more than half of the year.

9. Your qualifying child cannot be used by more than one person to claim the EIC.
10. You cannot be the qualifying child of another person.

Part C rules apply only if you do not have a qualifying child.

11. You must be at least age 25 but under age 65.
12. You cannot be the dependent of another person.
13. You cannot be the qualifying child of another person.
14. You must have lived in the United States for more than half the year.

The Part D rule applies to everyone.

15. Your earned income must be less than:

• $35,263 ($37,263 for married filing jointly) if you have more than one qualifying child,
• $31,030 ($33,030 for married filing jointly) if you have one qualifying child, or
• $11,750 ($13,750 for married filing jointly) if you do not have a qualifying child.

The earned income credit, and your eligibility, is determined on Schedule EIC.