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Information has been updated for the 2008 tax year.   

Overview

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.

bulletWorking families with one child are eligible with income up to $33,995 (and up to $36,995 for married workers);  
bulletWorking families with two or more children are eligible with income up to $38,646 (and up to $41,646 for married workers);  
bulletWorkers without children are eligible with income up to $12,880 (and up to $15,880 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.

bulletWorking families with one child can get up to $2,917; the maximum credit is for families earning approximately $8,000 - $14,000; 
bulletWorking families with two or more children can get up to $4,824; the maximum credit is for families earning approximately $11,000 - $14,000; 
bulletWorkers without children can get up to $438; the maximum credit is for workers earning approximately $5,200 - $6,500.

More detail on benefit amounts

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. 

Claiming the federal EIC:

What is the procedure for claiming the federal EIC?

bulletClaimants must file a tax return to receive the EIC, even if they do not owe taxes;
bulletFile Form 1040 or 1040A, along with Schedule EIC.  Those without qualifying children can file Form 1040EZ instead of 1040 or 1040A.
bulletClaimants need to know the Social Security numbers for all family members.
bulletThe 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.  
bulletTwo amounts are needed to determine eligibility:  total earned income, and adjusted gross income (AGI).  The instructions clearly indicate how to calculate these amounts.
bulletIf 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?

bulletThe 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. 
bullet 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.
bulletThe 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.
bulletOnly 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?

bulletThe 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?

bulletEligible 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.  
bulletForm 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?

bulletThe Volunteer Income Tax Assistance (VITA)  program provides free tax assistance in counties throughout Wisconsin. 
bulletTaxpayer 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.
bulletFollow 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.

 

Further information on the EIC:

Detailed information about EIC eligibility and benefits 

Frequently Asked Questions on the EIC   

Outreach materials on the EIC

Download tax forms and publications:

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 01/20/09

Cooperative Extension

Page author: Judi Bartfeld (bartfeld@facstaff.wisc.edu)

 

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