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Earned Income Tax Credit

(updated 10-20-03)

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:

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.

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