Chapter 6 Advance Payment of EIC in 2000 You can receive part of your year 2000 EIC in yourpaycheck by completing a form and giving it to youremployer. Do you expect to be eligible for the EIC this year(2000) and to have a qualifying child? If so, you can choose to getpayments of the EIC in your paycheck now instead of waiting to getyour EIC all at once in 2001 when you file your tax return for theyear 2000. These payments are called advance EIC payments. Thischapter explains how you may be able to get them this year and how toreport them on your tax return. Example: How advance payment of EICworksIn March of 2000, John and Tom worked together. Tom told John thathe gets $40 added to his paycheck each month because of the earnedincome credit. John would like to get an extra amount every month too.John needs to find out if he can claim the EIC in 2000. He shouldanswer the questions in Step 1 below and then, if he iseligible for advance EIC payments, go to Step 2. Note.In chapters 1 through 5 of this publication, the rules for claimingthe EIC apply to the EIC you claim on your 1999 tax return. In thischapter, the rules apply to EIC you expect to claim on your2000 tax return. If you received advance payments of the EIC in 1999,see Important Reminders on page 3 for information onreporting these payments. Step 1 - Find Out If You Are Eligible for Advance Payments of the EIC Answer the following four questions to see if you are eligible foradvance payments of EIC. Note. When the question says "expect," you do nothave to know that you will be able to answer "Yes" when you fileyour tax return. You can only make a best guess that you will be ableto answer "Yes." Question 1. Do you expect to have a qualifying child? (See thedefinition of qualifying child beginning on page 11.)   Yes. Go to Question 2.   No.   You cannot get advance payments of EIC. Question 2. Do you expect that your earned income and modifiedadjusted gross income will each be less than approximately $27,000? Tip: See the 2000 Form W-5 for theexact amount. Earned income and modified AGI are explained on pages 7and 22.   Yes. Go to Question 3.   No.   You cannot get advance payments of EIC. Question 3. Do you expect to be eligible for EIC in 2000 as explainedin chapters 1, 2, 3, and 4?   Yes. Go to Question 4.   No.   You cannot get advance payments of EIC. Not Sure. Read the rules in chapters 1, 2, 3, and 4 and/or theinstructions for Form W-5. Then answer "Yes" or"No." Note.The rules in chapters 1, 2, 3, and 4 are expected to be the samefor the year 2000, except that you will be allowed to have more earnedincome, a higher modified AGI, and possibly more investment income.The correct amounts for the year 2000 are in the instructions for the2000 Form W-5. Question 4. Are your wages subject to withholding of federal incometax, social security tax, or Medicare tax?   Yes. Go to Step 2.   No.   You cannot get advance payments ofEIC. 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 employera Form W-5 for the year 2000. Tip: If you are a farm worker and are paid ona daily basis, your employer is not required to pay you the advanceamount of EIC.After you have read the instructions and completedForm W-5, give the lowerpart 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 The law permits your employer to pay you only part of your EICduring the year in advance payments. You will get the rest of the EICyou are entitled to when you file your tax return in 2001 and claimthe EIC. If you get advance payments of EIC in the year 2000, you must fileForm 1040 or Form 1040A for that year (even if you would otherwise notbe required to file a tax return). You cannot file Form 1040EZ. Youmust file a return to report the payments you got in your paycheckthroughout the year and to take advantage of any additional 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 MoreInformation on page 50. 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 hasgiven her employer a Form W-5?Yes. 4. How often do I have to file Form W-5?The year 2000 Form W-5 you give to your employer is validuntil December 31, 2000. If you expect to be eligible for EIC in 2001and you want to receive advance payments, you must give your employera new Form W-5 in 2001. Do this each year you expect to beeligible for the EIC. 5. What should I do if my situation changes after I give FormW-5 to my employer?Give your employer a new Form W-5 if any situation shown inthe following table applies to you for 2000. Table 4. Changes to Advance EIC Status IF... THEN you must give youremployer 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 heremployer "Yes" on line 4. Step 3 - How To Report Advance Payments of EIC If you receive advance payments of EIC in the year 2000, and youlater find out that you are not eligible for some or all of them, youstill must report them on your tax return. If you receive advancepayments of EIC in the year 2000, you must file a year 2000 tax returnto report the payments. Box 9 of your Form W-2 will show theamount you received. See the instructions for Form 1040 or Form 1040Afor the line number on which you report advance payments of EIC. You cannot use Form 1040EZ to report your advance payments. Youmust file Form 1040 or Form 1040A. Earned Income Credit