What is the EIC?
The earned income credit (EIC) is a tax credit for certain
people who work and have earned income under $31,152. A tax credit
usually means more money in your pocket. It reduces the amount of tax
you owe. The EIC may also give you a
refund.
Can I Claim the EIC?
To claim the EIC, you must meet certain rules. These rules are
summarized in Table 1.
Table 1. Earned Income Credit in a Nutshell
| First, you must
meet all the rules in this column. |
Second, you must meet all the rules in one
of these columns, whichever applies. |
Third, you must meet
both the rules in this column. |
Chapter 1.
Rules for Everyone |
Chapter 2.
Rules If You Have a Qualifying Child |
Chapter 3.
Rules If You Do Not Have a Qualifying Child |
Chapter 4.
Figuring and Claiming the EIC |
1. You must have a valid
social security number that allows you to work. (See page 5.)
2. Your filing status cannot be "Married filing
separately." (See page 6.)
3. You must be a U.S. citizen or resident alien all
year. (See page 6.)
4. You cannot file Form 2555 or Form 2555-EZ
(relating to foreign earned income). (See page 6.)
5. Your investment income must be $2,400 or less. (See
page 6.)
6. You must have earned income. (See page 8.) |
7. Your child
must meet the relationship, age, and residency tests. (See page
11.)
8. Your qualifying child cannot be the qualifying child
of another person with a higher modified AGI. (See page 14.)
9. You cannot be a qualifying child of another person.
(See page 17.) |
10. You must be at least
age 25 but under age 65. (See page 18.)
11. You cannot be the dependent of another person. (See
page 18.)
12. You cannot be a qualifying child of another person.
(See page 19.)
13. You must have lived in the United States more than
half of the year. (See page 19.) |
14. Your earned income must be
less than:
·$31,152 if you have more than one qualifying child,
·$27,413 if you have one qualifying child, or
·$10,380 if you do not have a qualifying child. (See page
20.)
15. Your modified AGI must be less than:
·$31,152 if you have more than one qualifying child,
·$27,413 if you have one qualifying child, or
·$10,380 if you do not have a qualifying child. (See page
22.) |
Although everyone can use this publication to figure their EIC,
most people can choose to follow the steps in their tax form
instructions instead. Some of the worksheets in the tax form
instructions are shorter and easier than the ones found in this
publication. The worksheets in this publication cover more situations.
If you claim the EIC and it is later disallowed, you may have to
complete an additional form if you want to claim the credit in a
following year. See chapter 5
for more information.
What If I Was Sent Here From the Instructions for Form 1040
or Form 1040A?
Certain people must use this publication, instead of their form
instructions, to see if they meet the rules to take the EIC and to
figure the amount of the credit. You are one of those people if you
were sent here from Step 2 or Step 3 of the form
instructions. If that is the case, you have met at least the first
four rules. You now have to go to either Rule 5 or
Rule 6. Use Table 2, below, to see which rule to
begin with.
Table 2. Where to begin if you were sent here from
the instructions for Form 1040 or Form 1040A.
| IF you must use this
publication because... |
THEN you must meet the rules
in this publication and you can... |
| The amount on Form 1040, line 21,
includes an amount from Form 8814 (relating to a child's interest and
dividends) |
Begin with Rule 5 in chapter 1
(page 6).
1 |
| Your investment income (from Step 2 of the Form
1040 instructions) is more than $2,400 and you are filing
Form 4797 (relating to sales of business property) |
Begin with Rule 5 in chapter 1
(page 6).
1 |
| You are filing Schedule E (Form 1040) |
Begin with Rule 5 in chapter 1
(page 6).
1 |
| You are reporting income or a loss from the
rental of personal property not used in a trade or business |
Begin with Rule 5 in chapter 1
(page 6).
1 |
| You are claiming a loss on Form 1040, line 12,
13, or 18 |
Begin with Rule 6 in chapter 1
(page
8). |
| You (or your spouse if filing a joint return)
received distributions from a pension, annuity, or IRA that are not
fully taxable |
Begin with Rule 6 in chapter 1
(page
8). |
| You owe alternative minimum tax (AMT), found on
Form 1040, line 41, or included in the total found on Form 1040A, line
26 |
Begin with Rule 6 in chapter 1
(page
8). |
|
1You do not need to read the rest of this
table. |
How Do I Figure the Amount Of EIC?
If you can claim the EIC, you can either have the IRS figure the
amount of your credit, or you can figure it yourself. To figure it
yourself, you can complete EIC Worksheet A or B
in chapter 4.
Or, unless you must use this publication, you can
complete a worksheet in the instructions for the form you file.
How Can I Quickly Locate Specific Information?
You can use the index to look up specific information. In most
cases, index entries will point you to headings, tables, worksheets,
or to text in bold face.
How Can I Get EIC In My Paycheck In the Year 2001?
You may prefer to get some of next year's EIC throughout the year,
rather than wait and get EIC after you file your tax return. Chapter 6
explains advance payment of EIC and tells how, if you have a
qualifying child, you may be able to get some of the EIC in your
paycheck.
Important Changes
New definition of eligible foster child.
For tax years after 1999, the definition of an eligible foster
child has changed. The child now must be either your brother, sister,
stepbrother, or stepsister; a descendant (including a child or adopted
child) of your brother, sister, stepbrother, or stepsister; or a child
placed with you by an authorized placement agency. The other
requirements for a child to be an eligible foster child are on page
12.
Photographs of missing children.
The Internal Revenue Service is a proud partner with the National
Center for Missing and Exploited Children. Photographs of missing
children selected by the Center may appear in this publication on
pages that would otherwise be blank. You can help bring these children
home by looking at the photographs and calling
1-800-THE-LOST
(1-800-843-5678) if you recognize a child.
Important Reminders
Earned income credit has no effect on certain welfare
benefits.
Any refund you receive because of the EIC and any advance EIC
payments you receive will not be used to determine whether you are
eligible for the following benefit programs, or how much you can
receive from these programs.
- Temporary assistance for needy families (TANF).
- Medicaid and supplemental security income (SSI).
- Food stamps.
- Low-income housing.
Reporting advance payments of EIC received in 2000.
If you received advance payments of EIC in 2000, you must file Form
1040 or Form 1040A to report the payments. Your Form W-2, box 9,
(as shown in Figure 1, on the next page) will show the
amount you received.
Report the amount on line 55 (Form
1040) or line 34 (Form 1040A).
Figure 1. Reporting Advance EIC
Figure 1. Reporting Advance EIC
Spanish version of Publication 596.
You can order Publicación 596SP, Crédito por
Ingreso del Trabajo, from IRS. It is a Spanish translation of
Publication 596.
See How To Get Tax Help in the
Appendix to find out how to order this and other IRS forms
and publications.
Comments and suggestions.
We welcome your comments about this publication and your
suggestions for future editions.
You can e-mail us while visiting our web site at
www.irs.gov/help/email2.html.
You can write to us at the following address:
Internal Revenue Service
Technical Publications Branch
W:CAR:MP:FP:P
1111 Constitution Ave. NW
Washington, DC 20224
We respond to many letters by telephone. Therefore, it would be
helpful if you would include your daytime phone number, including the
area code, in your correspondence.
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