What is the EIC?
The earned income credit (EIC) is a tax credit for certain people who work and have earned income under $32,121. 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. (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 $2,450 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 15.)
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:
·$32,121 if you have more than one qualifying child,
·$28,281 if you have one qualifying child, or
·$10,710 if you do not have a qualifying child. (See page 20.)
15. Your modified AGI must be less than:
·$32,121 if you have more than one qualifying child,
·$28,281 if you have one qualifying child, or
·$10,710 if you do not have a qualifying child. (See page 22.) |
Do I Need This Publication?
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.
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 instructions for Form 1040
or Form 1040A.
What If I Was Sent Here From the Instructions for Form 1040 or Form 1040A?
If you were sent here from the instructions for Form 1040 or Form 1040A, you have met at least the first four rules to claim the credit. 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 (page 6).
1 |
| Your investment income (from Step 2 of the Form 1040 instructions) is more than $2,450 and you are filing Form 4797
(relating to sales of business property) |
Begin with Rule 5 (page 6).
1 |
| You are filing Schedule E (Form 1040) |
Begin with Rule 5 (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 (page 6).
1 |
| You are claiming a loss on Form 1040, line 12, 13, or 18 |
Begin with Rule 6 (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 (page 8).
2 |
| 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 (page 8). |
1You do not need to read the rest of this table.
2If the only distribution you received was from a Coverdell ESA, write "ESA" and the amount of the distribution that is nontaxable
directly to the right of line 61a (Form 1040) or line 39a (Form 1040A). If you were not sent to this publication for any other reason, you do not need
to read the rest of this publication. You can return to Step 3, question 5, on page 41 (Form 1040) or Step 3, question 2, on page 39 (Form 1040A).
|
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 2002?
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 Change for 2001
Kidnapped child.
You may be able to claim the EIC for persons with a qualifying child even though your child has been kidnapped. See Kidnapped child in
chapter 2.
Important Changes for 2002
New definition of earned income.
For tax years after 2001, earned income will no longer include employee compensation that is nontaxable. This will change Rule 6 and
Rule 14.
Elimination of modified adjusted gross income (AGI).
For tax years after 2001, you will no longer need to figure modified AGI. Your EIC will be figured using your AGI, not modified AGI.
This will change Rule 15.
New rules for persons with same qualifying child.
For tax years after 2001, new rules will be used to determine which person can claim the EIC on the basis of a qualifying child when two or more
persons have the same qualifying child. This will change Rule 8. For details, see Publication 553,
Highlights of 2001 Tax
Changes.
New definition of eligible foster child.
For tax years after 2001, the definition of an eligible foster child in Rule 7 will change. The child will have to live with you only
for more than half of the year, instead of the whole year.
Reduction of EIC by alternative minimum tax eliminated.
For tax years after 2001, your EIC will no longer be reduced by the amount of alternative minimum tax shown on your return.
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 considered income when determining whether you are
eligible for the following benefit programs, or how much you can receive from these programs. However, if the amounts you receive are not spent within
a certain period of time, they may count as an asset (or resource) and affect your eligibility.
- Temporary assistance for needy families (TANF).
- Medicaid and supplemental security income (SSI).
- Food stamps.
- Low-income housing.
Disallowed EIC.
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 later year. See
chapter 5 for more information.
Reporting advance payments of EIC received in 2001.
If you received advance payments of EIC in 2001, 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 56 (Form 1040) or line 35 (Form 1040A).
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.
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.
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.
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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