Publication 596, Earned Income Credit (EIC); Introduction

Introduction

What is the EIC?

The earned income credit (EIC) is a tax credit for certain people who work and have earned income under $30,580. 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 see if you can claim the EIC, you must first meet all of the rules explained in chapter 1. Then you must meet the rules in chapter 2 or chapter 3, depending on whether you have a qualifying child. There are two final rules you must meet in chapter 4. All of the rules in these four chapters are summarized in Table 1.

Table 1. Earned Income Credit in a Nutshell
First, you must meet all rules in this column.	Second, you must meet all the rules in either of these columns.		Third, you must meet all 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 $2,350 or less. (See page 6.) 6. You must have earned income. (See page 7.)	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 14.) 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.discount hotels in Nice 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: $30,580 if you have more than one qualifying child, $26,928 if you have one qualifying child, or $10,200 if you do not have a qualifying child. (See page 21.) 15. Your modified AGI must be less than: $30,580 if you have more than one qualifying child, $26,928 if you have one qualifying child, or $10,200 if you do not have a qualifying child. (See page 22.)

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.

Caution: 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 following year. See chapter 5 for more information.

What If I Was Sent Here From the Instructions For Form 1040 or Form 1040A?

Certain people must use this publication to see if they can take the EIC and to figure the amount of the credit. You must meet all of the rules in chapters 1 and 4, and all of the rules in either chapter 2 or 3 (whichever applies). If you were sent here from Step 3 of your tax form instructions, you have met at least the first four rules in chapter 1. 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. What if I was 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...
Your investment income (from Step 2 of the Form 1040 instructions) is more than $2,350 and you are filing Form 4797 (relating to sales of business property)	Begin with Rule 5 in chapter 1 (page 6). ¹
You are filing Schedule E (Form 1040)	Begin with Rule 5 in chapter 1 (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 in chapter 1 (page 6). ¹
You are claiming a loss on Form 1040, line 12, 13, or 18	Begin with Rule 6 in chapter 1 (page 7).
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 in chapter 1 (page 7).
You owe alternative minimum tax (AMT), found on Form 1040, line 51, or included in the total found on Form 1040A, line 34	Begin with Rule 6 in chapter 1 (page 7).
¹You do not need to read the rest of this table.

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 the 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 2000?

If you have a qualifying child, you may prefer to get some of next year's credit throughout the year, rather than wait and get the credit after you file your tax return. Chapter 6 explains advance payment of EIC and tells how you may be able to get some of the credit in your paycheck.

Important Reminders

Earned income credit has no effect on certain welfare benefits. The EIC and advance EIC payments you receive will not be used to determine whether you are eligible for the following benefit programs, or how much you can receive from these programs.

Temporary assistance for needy families (TANF).
Medicaid and supplemental security income (SSI).
Food stamps.
Low-income housing.

Reporting advance payments of EIC received in 1999. If you received advance payments of EIC in 1999, you must file Form 1040 or Form 1040A to report the payments. Your Form W-2, box 9, (as shown in Figure 1, below) will show the amount you received. Report the amount on line 54 (Form 1040), or line 33 (Form 1040A).

Figure 1. Reporting Advance EIC

Figure 1. Reporting Advance EIC

Spanish version of Publication 596. You can order Publicacin 596SP, Crdito por Ingreso del Trabajo, from IRS. It is a Spanish translation of Publication 596. See How To Get More Information in the Appendix to find out how to order this and other IRS forms and publications.