Chapter 6
Advance Payment of EIC in 2000
You can receive part of your year 2000 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
(2000) 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 2001 when you file your tax return for the
year 2000. 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: How advance payment of EIC
works
In March of 2000, 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 2000. He should
answer the questions in Step 1 below and then, if he is
eligible for advance EIC payments, go to Step 2.
Note.
In chapters 1 through 5 of this publication, the rules for claiming
the EIC apply to the EIC you claim on your 1999 tax return. In this
chapter, the rules apply to EIC you expect to claim on your
2000 tax return. If you received advance payments of the EIC in 1999,
see Important Reminders on page 3 for information on
reporting these payments.
Step 1 - Find Out If You Are Eligible for Advance Payments of the EIC
Answer the following four questions to see if you are eligible for
advance payments of 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."
Question 1.
Do you expect to have a qualifying child? (See the
definition of qualifying child beginning on page 11.)
 Yes. Go to Question 2.
No.  You cannot get advance payments of EIC.
Question 2.
Do you expect that your earned income and modified
adjusted gross income will each be less than approximately $27,000?
Tip: See the 2000 Form W-5 for the
exact amount. Earned income and modified AGI are explained on pages 7
and 22.
Yes. Go to Question 3.
No. You cannot get advance payments of EIC.
Question 3.
Do you expect to be eligible for EIC in 2000 as explained
in chapters 1, 2, 3, and 4?
Yes. Go to Question 4.
No. You cannot get advance payments of EIC.
Not Sure. 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 the same
for the year 2000, except that you will be allowed to have more earned
income, a higher modified AGI, and possibly more investment income.
The correct amounts for the year 2000 are in the instructions for the
2000 Form W-5.
Question 4.
Are your wages subject to withholding of federal income
tax, social security tax, or Medicare tax?
Yes. Go to Step 2.
No. You cannot get advance payments of
EIC.
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 the year 2000.
Tip: If you are a farm worker and are paid on
a daily basis, your employer is not required to pay you the advance
amount of EIC.
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.
top of form W-5
The law permits your employer to pay you 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 2001 and claim
the EIC.
If you get advance payments of EIC in the year 2000, you must file
Form 1040 or Form 1040A for that year (even if you would otherwise not
be required to file a tax return). You cannot file Form 1040EZ. You
must file a return to report the payments you got in your paycheck
throughout the year and to take advantage of any additional 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 More
Information on page 50.
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 year 2000 Form W-5 you give to your employer is valid
until December 31, 2000. If you expect to be eligible for EIC in 2001
and you want to receive advance payments, you must give your employer
a new Form W-5 in 2001. 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 2000.
Table 4. Changes to Advance EIC Status
| IF... |
THEN you must give your
employer a new Form W-5. To indicate your change,
check... |
|
You no longer have a qualifying child |
"No" on line 2. |
|
You are no longer eligible for the EIC |
"No" on line 1. |
|
You no longer want advance payments |
"No" on line 1. |
|
Your spouse files Form W-5 with his or her
employer |
"Yes" on line 4. |
Step 3 - How To Report Advance Payments of EIC
If you receive advance payments of EIC in the year 2000, 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. If you receive advance
payments of EIC in the year 2000, you must file a year 2000 tax return
to report the payments. 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.
You cannot use Form 1040EZ to report your advance payments. You
must file Form 1040 or Form 1040A.
Earned Income Credit
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