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Taxmap/pubs/p554-015.htm#TXMP1e297f34 Earned Income Credit

EIC

The earned income credit (EIC) is a tax credit for certain people who work and have earned income under $35,458. The earned income credit is available to persons with or without a qualifying child. This section will list separately the rules that persons with a qualifying child and persons without a qualifying child must meet to get the credit. After you have read the rules, if you think you may qualify for the credit, see Publication 596, Earned Income Credit. You also can find information in the instructions for Form 1040 (line 65a), Form 1040A (line 41a), or Form 1040EZ (line 8a).

Taxmap/pubs/p554-015.htm#TXMP558f8900 Investment income more than $2,650.

You cannot claim the earned income credit unless your investment income is $2,650 or less. For most people, investment income is taxable interest (line 8a of Form 1040 or 1040A, or Form 1040EZ, line 2), tax-exempt interest (line 8b of Form 1040 or 1040A, or written to the right of the words Form 1040EZ on Form 1040EZ, line 2), dividend income (line 9a of Form 1040 or 1040A), and capital gain net income (Form 1040, line 13, if more than zero on Form 1040A, line 10). See Publication 596 for more information.

Taxmap/pubs/p554-015.htm#TXMP6a1b1543 Credit has no effect on certain welfare benefits.

The earned income credit and any advance earned income credit payments you receive generally will not be used to determine whether you are eligible for the following benefit programs, or how much you can receive from the programs.

• Medicaid and supplemental security income (SSI).
• Food stamps.
• Low-income housing.

Temporary assistance for needy families (TANF) benefits may be affected. Please check with your state.

Taxmap/pubs/p554-015.htm#TXMP22b1a0d9 Social security number.

You must provide a correct and valid social security number (SSN) for yourself, your spouse, and any qualifying children. If an SSN is missing or incorrect, you may not get the credit. See Publication 596 for more detailed information.

The social security number must be issued by the Social Security Administration to a U.S. citizen or to a person who has permission to work in the United States. If your social security card says not valid for employment, you cannot get the earned income credit.

Taxmap/pubs/p554-015.htm#TXMP469dcadc Self-employed persons.

If you are self-employed and your net earnings are $400 or more, be sure to fill out correctly Schedule SE (Form 1040), Self-Employment Tax, and pay the proper amount of self-employment tax. If you do not, you may not get all the credit to which you are entitled.

Taxmap/pubs/p554-015.htm#TXMP536efaa3 Who Can Claim the Credit?

The earned income credit is available to persons with or without a qualifying child. Some of the rules are the same, but some of the rules only apply to persons with a qualifying child or to persons without a qualifying child.

Taxmap/pubs/p554-015.htm#TXMP235cf9a5 Persons Who Work and Have   One or More Qualifying Children

Persons Who Work and Have One or More Qualifying Children

Generally, if you are a nonresident alien for any part of the year, you cannot claim the credit. To claim the earned income credit under this section, you must meet all the following rules.

1. You must have a qualifying child who lived with you in the United States for more than half the year.
2. You must have earned income during the year.
3. Your earned income and adjusted gross income (AGI) each must be less than:
   1. $30,338 ($31,338 for married filing jointly) if you have one qualifying child, or
   2. $34,458 ($35,458 for married filing jointly) if you have more than one qualifying child.
4. Your investment income cannot be more than $2,650.
5. Your filing status can be any filing status except married filing separately.
6. You cannot be a qualifying child of another person. If you file a joint return, neither you nor your spouse can be a qualifying child of another person.
7. Your qualifying child cannot be used by more than one person to claim the credit. If you and someone else have the same qualifying child, you and the other person(s) can decide who will claim the credit using that child. If you and the other person(s) cannot agree, see Publication 596.
8. You are not filing Form 2555, Foreign Earned Income or Form 2555-EZ, Foreign Earned Income Exclusion.

Taxmap/pubs/p554-015.htm#TXMP37ecc0d3 Who is a qualifying child?

You have a qualifying child if your child meets three tests. The tests are:

• Relationship,
• Residency, and
• Age.

Taxmap/pubs/p554-015.htm#TXMP29bf13f9 Relationship test.

To meet the relationship test for a qualifying child, the child must be your:

• Son, daughter, stepson, stepdaughter, or adopted child (or a descendant of your son, daughter, stepson, stepdaughter, or adopted child—for example, your grandchild),
• Brother, sister, stepbrother, or stepsister (or a descendant of your brother, sister, stepbrother, or stepsister) whom you cared for as you would your own child, or
• Eligible foster child.

See Publication 596 for an explanation of who is an eligible foster child.

Taxmap/pubs/p554-015.htm#TXMP17676abc Residency test.

To meet the residency test, there are two rules.

• You must have a child who lived with you for more than half the year.
• The home must be in the United States (one of the 50 states or the District of Columbia). U.S. military personnel stationed outside the United States on extended active duty are considered to live in the United States for the purposes of the earned income credit.

Taxmap/pubs/p554-015.htm#TXMP029d0de8 Age test.

To meet the age test, your child must be:

• Under age 19 at the end of the year,
• A full-time student under age 24 at the end of the year, or
• Permanently and totally disabled at any time during the tax year, regardless of age.

Taxmap/pubs/p554-015.htm#TXMP5b1b475d Persons Who Work and   Do Not Have a Qualifying Child

Persons Who Work and Do Not Have a Qualifying Child

Generally, if you are a nonresident alien for any part of the year, you cannot claim the earned income credit. In order to take the earned income credit under this section, you must meet all the following rules.

• You must have earned income during the year.
• Your earned income and adjusted gross income (AGI) each must be less than $11,490 ($12,490 if married filing jointly).
• Your investment income must be $2,650 or less.
• Your filing status can be any filing status except married filing separately.
• You cannot be a qualifying child of another person. If you file a joint return, neither you nor your spouse can be a qualifying child of another person.
• You (or your spouse if filing a joint return) must be at least age 25 but under age 65 at the end of the year.
• You cannot be eligible to be claimed as a dependent on anyone else's return. If you file a joint return, neither you nor your spouse can be eligible to be claimed as a dependent on anyone else's return.
• Your main home (and your spouse's if filing a joint return) must be in the United States for more than half the year. U.S. military personnel stationed outside the United States on extended active duty are considered to live in the United States for the purposes of the earned income credit.
• You are not filing Form 2555 or Form 2555-EZ.

Taxmap/pubs/p554-015.htm#TXMP259972dc Advance Earned Income   Credit Payments

Earned Income Credit, Advance Payment

If you have a qualifying child and expect to qualify for the earned income credit in 2005, you can choose to receive advance payments of part of the credit in your regular paycheck.

You can request advance payments of the credit for 2005 by completing a 2005 Form W-5. See Publication 596 or the Form W-5 instructions for more information on the advance earned income credit.

You must file a 2004 return to report what you already received as an advance payment in 2004 and to get any additional earned income credit.

You must have at least one qualifying child and qualify for the earned income credit to get the advance payment of the credit in your pay.

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