IntroductionWhat is the EIC?The earned income credit (EIC) is a tax credit for certain people who work and have earned income under $32,121. 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 claim the EIC, you must meet certain rules. These rules are summarized in Table 1.
Do I Need This Publication?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. Certain people must use this publication, instead of their form instructions, to see if they meet the rules to take the EIC and to figure the amount of the credit. You are one of those people if you were sent here from Step 2 or Step 3 of the instructions for Form 1040 or Form 1040A. What If I Was Sent Here From the Instructions for Form 1040 or Form 1040A?If you were sent here from the instructions for Form 1040 or Form 1040A, you have met at least the first four rules to claim the credit. You now have to go to either Rule 5 or Rule 6. Use Table 2, below, to see which rule to begin with.
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 a 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 2002?You may prefer to get some of next year's EIC throughout the year, rather than wait and get EIC after you file your tax return. Chapter 6 explains advance payment of EIC and tells how, if you have a qualifying child, you may be able to get some of the EIC in your paycheck. Important Change for 2001Kidnapped child. You may be able to claim the EIC for persons with a qualifying child even though your child has been kidnapped. See Kidnapped child in chapter 2. Important Changes for 2002New definition of earned income. For tax years after 2001, earned income will no longer include employee compensation that is nontaxable. This will change Rule 6 and Rule 14. Elimination of modified adjusted gross income (AGI). For tax years after 2001, you will no longer need to figure modified AGI. Your EIC will be figured using your AGI, not modified AGI. This will change Rule 15. New rules for persons with same qualifying child. For tax years after 2001, new rules will be used to determine which person can claim the EIC on the basis of a qualifying child when two or more persons have the same qualifying child. This will change Rule 8. For details, see Publication 553, Highlights of 2001 Tax Changes. New definition of eligible foster child. For tax years after 2001, the definition of an eligible foster child in Rule 7 will change. The child will have to live with you only for more than half of the year, instead of the whole year. Reduction of EIC by alternative minimum tax eliminated. For tax years after 2001, your EIC will no longer be reduced by the amount of alternative minimum tax shown on your return. Important RemindersEarned income credit has no effect on certain welfare benefits. Any refund you receive because of the EIC and any advance EIC payments you receive will not be considered income when determining whether you are eligible for the following benefit programs, or how much you can receive from these programs. However, if the amounts you receive are not spent within a certain period of time, they may count as an asset (or resource) and affect your eligibility.
Disallowed EIC. 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 later year. See chapter 5 for more information. Reporting advance payments of EIC received in 2001. If you received advance payments of EIC in 2001, you must file Form 1040 or Form 1040A to report the payments. Your Form W-2, box 9, (as shown in Figure 1, on the next page) will show the amount you received. Report the amount on line 56 (Form 1040) or line 35 (Form 1040A). Figure 1. Reporting Advance EIC Spanish version of Publication 596. You can order Publicación 596SP, Crédito por Ingreso del Trabajo, from IRS. It is a Spanish translation of Publication 596. See How To Get Tax Help in the Appendix to find out how to order this and other IRS forms and publications. Photographs of missing children. The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Comments and suggestions. We welcome your comments about this publication and your suggestions for future editions. You can e-mail us while visiting our web site at
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