Information Outreach

Earned Income Tax Credit

Low-income families (with children) who work part time or full time can increase their take-home pay through the Earned Income Tax Credit. The amount of extra money depends on income and family size, and a family does not have to owe taxes to get the EITC.

There are two ways families can receive extra EITC money:

• They can receive EITC money when filing their tax return.
• They can receive part of the extra EITC money in advance with each paycheck and the rest when they file their tax return.

To get the extra EITC money in advance with each paycheck, employees must file Form W-5 with their employer. Employees can get Form W-5 from their employer. The EITC does not cost the employer any money because it is taken out of the employee's federal withholding taxes.

An example of how the EITC works:

In 2002, a family (with two children) with gross income between $ and $ a year can receive $ in extra EITC money. The family can receive the entire $ when they file their federal tax return or they can opt to receive $ per month and the remaining $ when they file their federal tax return.

Note that the EITC money is not counted as income when applying for Medicaid, AFDC/TANF, Food Stamps, Supplemental Security Income (SSI) or housing assistance.

To take advantage of the EITC, a family must file a federal tax return. Free help with filing tax returns is available by calling the Internal Revenue Service (IRS) at 1-800-829-1040.

Reports of Interest

• Should the EITC for Workers Without Children be Abolished, Maintained or Expanded? by Robert Greenstein, Center on Budget and Policy Priorities, Updated July 2000.
• A Hand Up - How State Earned Income Tax Credits Help Working Families Escape Poverty in 2000: An Overview, by Nicholas Johnson, Center on Budget and Policy Priorities, Updated June 2000.
• The 1998 Earned Income Credit Campaign Information Kit, Center on Budget and Policy Priorities, 1998.
• Rising Number of States Offer Earned Income Tax Credits, by Nicholas Johnson and Ed Lazere, Center on Budget and Policy Priorities, September 14, 1998.
• "Earned Income Tax Credit," Southern Regional Initiative to Improve Access to Benefits for Low Income Families With Children, Southern Institute on Children and Families, February 1998.

Related Links

• Earned Income Tax Credit (EITC) Tax Information from the Internal Revenue Service (IRS).