January 29, 2010 is Advance Earned Income Tax Credit (EITC) Awareness Day. EITC is a tax credit that lets certain families with lower incomes receive up to $1,830 of the EITC in advance on their paychecks instead of waiting until tax time to file for the credit. To qualify for the credit, the employee must meet these criteria:
- Expect to have a qualifying child in 2010
- Expect that 2010 income will be less than $35,535 ($40,545 if filing jointly)
- Expect that 2010 investment income will be less than $3,100
For a specific questionnaire on whether or not someone can claim Advance EITC, please direct your employees to the EITC Assistant at www.irs.gov/eitc or call 1-800-829-1040. Employees who qualify for EITC will need to fill out a form W-5 located on Webstep under Forms or at http://www.irs.gov/pub/irs-pdf/fw5.pdf then fax to Nextep at 888-811-5161 to claim this credit. Even if an employee claimed the credit in 2009, s/he will still need to fill out a new W-5 to claim the credit in 2010.
By February 15, Employers must notify each employee who worked at any time during the year and from whom no income tax was withheld (unless the employee claimed exemption from withholding on Form W-4). They are also encouraged to notify each employee whose wages for 2009 were less than $48,279 that s/he may be eligible for the EITC.
For most employees, this requirement is met by the 2009 Form W-2 that Nextep has sent out, which contains information about EITC on the back. Therefore, the employer’s burden is limited to employees hired in 2010 who may be eligible. Employee pay rate information can be found in the reports section of Webstep. Please give those employees IRS Form 797, found at http://www.irs.gov/pub/irs-pdf/n797.pdf.
For much more information, including English and Spanish posters that you can hang in your break room letting your employees know about the EITC, please visit www.eitc.irs.gov.