The Advanced Earned Income Tax Credit

Who qualifies for the EITC?
There are six criteria that must be met before an individual qualifies for the EITC:

The individual must have earned income during the year. The income must be earned in the form of wages or salary paid by an employer. Self-employed individuals are not eligible for the EITC.
The earned income and modified annual gross income must be less than:
- $9,770 for taxpayers with no children
- $25,670 for taxpayers with one qualifying child
- $29,290 for taxpayers with more than one qualifying child
  A qualifying child is a son, daughter, grandchild, stepchild or eligible foster child who lived with the taxpayer for at least half the year. The child must also be under 19, or under 24 and a full-time student. Any child who is permanently and totally disabled and living at home also qualifies.
The taxpayer's investment income cannot be greater than $2,250.
The individual cannot file as married, filing separately.
The taxpayer (or taxpayer and spouse, if filing jointly) cannot be the qualifying child of another taxpayer.
The qualifying child cannot be the qualifying child of another taxpayer with a greater modified AGI.

A social security number is also required to receive the EITC. If a married couple is filing jointly they must both have social security numbers. The credit cannot be claimed by a taxpayer with an individual identification number.

What are the additional qualifications for AEITC?
The only requirements for claiming the AEITC are qualifying for the EITC and having at least one qualifying child living at home. If these criteria are met, the taxpayer can receive their EITC in his or her paychecks throughout the year, instead of at year's end.

Should everyone who qualifies participate in AEITC?
The majority of those who qualify can probably benefit from the additional income throughout the year and will want to participate. However, anyone whose income is near the maximum allowed, or whose income might fluctuate throughout the year, may want to wait until the end of the year.

A taxpayer who claims and receives AEITC and later sees his income rise above the limit is responsible for filing a new W-5 form with his employer to stop AEITC payments. He will also be responsible for returning all EITC payments when he files his tax return.

The danger of being forced to return the advanced payments to the IRS at year's end is probably great enough that anyone who thinks their income may rise above the limit during the year should wait until year's end to claim the EITC.

Is there more information available on the EITC and AEITC?
IRS publication 596, Earned Income Credit, provides the formula for estimating EITC and gives additional details about the program. The IRS Web site, www.irs.gov, also includes FAQ's about both EITC and AEITC.