You can receive part of your 2002 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 (2002) 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 2003 when you file your tax return for the year 2002. 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 2002, 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 2002. He should answer the questions in Step 1 below and then, if he is eligible for advance EIC payments, go to Step 2.

Note. Chapters 1 through 5 of this publication are about the EIC you claim on your 2001 tax return. This chapter is about the EIC you expect to claim on your 2002 tax return.

Step 1 - Find Out If You Are Eligible for Advance Payments of the EIC

Answer the following three 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.

Tip: See the 2002 Form W-5 for the exact amount. Earned income and AGI are explained on pages 8 and 22.

Do you expect that your earned income and adjusted gross income will each be less than about $29,000?

	Yes. Go to Question 3.
	No. You cannot get advance payments of EIC.

Question 3.

Tip: If you are a farm worker paid on a daily basis, your employer is not required to pay you advance EIC. Also, you cannot get advance EIC unless your wages are subject to federal income tax, social security tax, or Medicare tax withholding.

Do you expect to be eligible for EIC in 2002 as explained in chapters 1, 2, 3, and 4?

	Yes. Go to Step 2.
	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 basically the same for 2002, except that you will be allowed to have more earned income and possibly more investment income. In addition, you will figure your 2002 credit using AGI instead of modified AGI, and your 2002 AGI can be higher than your 2001 modified AGI can be. The correct amounts for 2002 are in the instructions for the 2002 Form W-5. Other changes due to recent legislation are explained in Important Changes for 2002, in the Introduction.

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 2002.

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

You may get 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 2003 and claim the 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 Tax Help on page 49.

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 2002 Form W-5 you give to your employer is valid until December 31, 2002. If you expect to be eligible for EIC in 2003 and you want to receive advance payments, you must give your employer a new Form W-5 in 2003. 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 2002.

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 received advance payments of EIC in 2001, see Important Reminders on page 3 for information on reporting these payments.

If you receive advance payments of EIC in 2002, you must file a 2002 tax return (even if you would not otherwise have to file) to report the payments and claim any additional EIC. 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.

If you receive advance payments of EIC in 2002, 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.

You cannot use Form 1040EZ to report your advance payments. You must file Form 1040 or Form 1040A.

Previous | First | Next

Publication Index | 2001 Tax Help Archives | Tax Help Archives | Home