Advance Earned Income Tax Credit can
Raise Monthly Take Home Pay by $105

WASHINGTON - Over 20 million workers may qualify for the 1995 Earned Income Tax Credit (BITC), and most of them don't have to wait until next year to get it. Advance EITC payments allow many workers with earned income under $24,396 and a qualifying child to increase their take-home pay by as much as $105 a month starting with their next paycheck.

The IRS today asked representatives of community and professional associations to join the effort to inform the public about advance EITC. "The credit provides an appropriate incentive to keep workers in the work force," said IRS Commissioner, Margaret Milner Richardson. "The credit could pay utility bills or put extra food on the table. It could mean health or dental care that all too often is deferred by these families because the money is simply not available."

However, fewer than 1 percent of Americans eligible for the credit are getting the advance payments. Last year IRS undertook an extensive publicity campaign to inform employees about EITC and the advance payment option. This year IRS is also focusing on employers throughout the country to help spread the word about the availability of advance payments.

Associations can be a tremendous catalyst in making sure their members know about the advance payments, said Commissioner Richardson, because many of them represent employers with lower income workers.

Many eligible workers get the credit when they file their tax return. But these workers can receive up to $1,256 -- 60 percent of the total -- throughout the year in their paychecks. All they have to do is submit a one-page form -- Form W-5, Earned Income Credit Advance Payment Certificate -- to their employer. Employees get the other 40 percent when they file their taxes in the next year.

And for employers, there is minimum reporting, and it doesn't cost them a dime. The payment is actually made from employment taxes the employer would otherwise pay to IRS. So, workers get to use the money now instead of waiting for the government to give it back to them in the next year.

For more information on the advance EITC, get Form W-5, Publication 596, Earned Income Credit, or Publication 15, Employer's Tax Guide -- for employers, or call the IRS on 1-800-829-1040.

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