How Is EIC Calculated?

You can qualify for a higher earned income credit with one, two or three children.

You can qualify for the Earned Income Credit (EIC) based on your family size and annual household income. You can be single with no dependents or married with one or more dependents. The Earned Income Credit Tax Table calculates the amount of EIC based on qualifying income and number of children.

Qualifying Children

You must fill out a Schedule EIC with your annual 1040 or 1040A tax form. Information about each qualifying child is required, including first name, last name, social security number and birth date. Additional information regarding the child's age, disabilities, relationship to you and months with you in the United States is required. The child must be under 19 years of age, under 24 years of age and a student, or any age and disabled. He must live with you at least half time during the applicable year. The amount of your earned income credit will be calculated based on the amount of your earned income, the number of qualifying children and where your income falls on the EIC Table for the applicable year.

General Requirements

The Earned Income Credit table shows the amount of EIC you will receive. You may not need to have a qualifying child if you are over 25 years old and under 65 years old. In 2009, you could qualify without children, with an adjusted gross income under $13,440 or higher if married filing jointly. With or without children, to qualify for an EIC you must be a U.S. citizen or qualified alien resident for the entire year, provide a valid social security number, and cannot file "married filing separately." Financially, you must have earned income. Your adjusted gross income must be under the established limit, depending on the number of qualifying children. No foreign earned income or foreign earned income exclusions are permitted. Investment income also is limited.

Distributions

Your earned income credit will be issued as a tax refund as early as February of the filing year, when the worksheet and tax forms are completed electronically at the beginning of the year. An advance earned income credit is available through an employer and can be requested during the hiring process. Instead of being distributed in one lump sum, the advanced EIC is paid in installments with each paycheck. You must complete a Form W-5 Earned Income Credit Advance Payment Certificate, that confirms that you do expect to have a qualifying child, expect to have income below the required limits and expect to qualify for an EIC. These advance payments must be reported when tax returns are filed for the year.

References

• IRS: Schedule EIC

Resources

• IRS: Publication 596