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Information
has been updated for the 2007 tax year.
What is the Earned Income Tax Credit?
The Earned Income Tax Credit (EIC) is a special tax
benefit for people who earn low or moderate incomes. It lowers their taxes,
supplements their wages, and makes work more attractive and affordable.
Qualifying persons who file federal tax returns get back some or all of the federal
income tax withheld from their pay during the year. Even workers whose earnings
were too small to have taxes withheld can get the EIC. Families with children
who claim the federal EIC are automatically eligible for the Wisconsin
Earned Income Credit.
Who can get the EIC?
The EIC is available to workers with low to moderate
incomes. The income limit depends on the number of 'qualifying children' and on
whether the tax filer is married or unmarried.
 | Working families with one child are eligible with
income up to $33,241 (and up to $35,241 for married workers); |
| Working families with two or more children are
eligible with income up to $37,783 (and up to $39,783 for married workers); |
| Workers without children are eligible with income up
to $12,590 (and up to $14,590 for married workers). |
More detail on
eligibility rules, including information about qualifying children
How much can individuals and families get back from the
EIC?
The amount of the credit depends on earnings and on adjusted gross
income. As income increases, the value of the
credit increases, until the maximum credit is reached. As income increases
further, the value of the credit gradually decreases.
| Working families with one child can get up to $2,853;
the maximum credit is for families earning approximately $8,000 - $14,000; |
| Working families with two or more children can get up
to $4,716; the maximum credit is for families earning approximately $11,000 -
$14,000; |
| Workers without children can get up to $428; the
maximum credit is for workers earning approximately $5,200 - $6,500. |
Will getting the EIC affect eligibility for welfare
benefits?
The EIC -- and other tax credits -- do not count as income
in determining eligibility for benefits such as W-2, Medicaid, Food Stamps, SSI,
or public or subsidized housing.
What is the procedure for claiming the federal EIC?
| Claimants must file a tax return to receive the EIC, even if
they do not owe taxes; |
| File Form
1040
or 1040A, along
with Schedule EIC.
Those without qualifying children can file Form 1040EZ
instead of 1040 or 1040A. |
| Claimants need to know the Social Security numbers for all
family members. |
| The instructions for determining eligibility, and
the amount of the credit, are found in the instruction booklets
accompanying the tax forms (instructions
for Form 1040; instructions
for Form 1040A; instructions
for Form 1040EZ ). These instructions refer
certain filers with more complicated situations to Publication
596 to determine their eligibility and benefit amount. |
| Two amounts are needed to determine eligibility: total earned income, and
adjusted gross income
(AGI). The instructions clearly indicate how
to calculate these amounts. |
| If the tax return shows that taxes are owed, subtract
the EIC credit and you will owe less or get money back. If you owe no
taxes, but qualify for the EIC, you will get a refund check for your EIC
amount. |
Is the federal EIC available in advance?
| The Advance Earned Income Credit allows some workers to
get part of the EIC included in their regular paychecks. If eligible for the
advance credit, workers must file a
W-5 form with their employer each January. |
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Employers are required to make the advance EIC available to eligible employees.
There is no cost to the employer -- they simply reduce the amount of taxes they
would otherwise send to the government -- and they are not responsible for
verifying eligibility. |
| The amount of the advance EIC depends on earnings.
Workers with qualifying children can get up to approximately $127 per month from the
advance EIC. This is included in the worker's regular paycheck.
The advance EIC can increase a worker's paycheck by as much as 20 percent. |
| Only part of the EIC is payable in advance. Most
workers who receive the advance EIC should be eligible for an additional
credit when they file their tax return. |
Can a worker get the EIC for prior years, if she/he was eligible
but didn't claim it?
| The EIC can be claimed for up to three previous years,
if a claimant was eligible. |
What additional rules apply to workers who applied,
but were denied the credit, in past years?
| Eligible workers who claimed the EIC in error in a
previous year, and who were denied the credit by the IRS, should file Form
8862, "Information to Claim Earned Income Credit After
Disallowance," along with their tax return. |
| Form 8862 is not required if the EIC was denied due to
a math or clerical error. |
Where can workers get help filing for the EIC?
| The Volunteer Income Tax Assistance (VITA)
program provides free tax assistance in counties throughout Wisconsin.
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| Taxpayer Counseling for the Elderly (TCE) provides free
tax assistance for the elderly, as well as for persons eligible for the Earned
Income Credit or the Homestead Credit. |
| Follow this link for information on VITA
and site locations and hours. Information on
TCE
site locations is also available from this link or from the AARP at 1-888-227-7669. |
Detailed information about
EIC eligibility and benefits
Frequently Asked
Questions on the EIC
Form 1040
(1040 Instructions)
Form 1040A
(1040A Instructions)
Form 1040EZ
(only use if no qualifying children) (1040EZ Instructions)
Schedule EIC (file with Form 1040 or 1040A)
Form 8862: Information to claim EIC after
Disallowance (8862
Instructions)
Form 1040X: Amended U.S. Individual Income Tax Return
(1040X Instructions)
Form W-5
(to apply for advance credit)
Publication 596: Earned Income Credit (includes detailed
information about eligibility and benefits)
Publication 596 (Spanish)
This website is an educational
resource only. For specific tax questions, seek professional tax
assistance or contact the IRS hotline at 1-800-tax-1040.
Last modified on
01/28/08
Cooperative
Extension
Page author: Judi
Bartfeld (bartfeld@facstaff.wisc.edu)
©
1996-2001 Board of Regents of the University of Wisconsin System,
doing business as the Division of Cooperative Extension of the University
of Wisconsin-Extension.
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