Earned Income Credit

by | Jun 21, 2021 | All Great Easy Ways To Save Tax And Good Deductions | 0 comments

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Earned Income Credit

The earned income credit is a tax credit for certain workers whose earned income is below a certain level. Because it is a credit, the earned income credit is subtracted from the amount of tax. Even workers who are not required to file a tax return because their wages are below the minimum income-level requirements to file may be able to receive the credit. They must file a tax return in order to receive the credit, however. 

The tax-exempt organization can use the advance earned income credit tables in Publication 15 PDF to figure the correct amount of advance earned income credit payment. For deposit purposes, advance payments reduce withheld income taxes and employee and employer Social Security and Medicare taxes, thereby reducing the tax-exempt organization’s total tax liability.

For more information, see Chapter 10, Advance Earned Income Credit (EIC) Payment, in Publication 15 PDF.

Note:  An employee’s advance earned income credit payments may be limited; any additional earned income credit amount must be claimed on the employee’s tax return.

The tax-exempt organization must notify each employee from whom the organization did not withhold any income tax about the earned income credit.  The organization will meet the notification requirements by giving the employee either Notice 797, Possible Refund on Your Federal Income Tax Returns Because of the Earned Income Credit (EIC) PDF  or the tax-exempt organization’s own written statement if it has the exact wording of Notice 797; or the official Form W-2, Wage and Tax Statement PDF, which contains a statement on the back of Copy C. Exception: The tax-exempt organization does not need to notify those employees who claimed exemption from withholding on Form W-4.

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Research & References of Earned Income Credit|A&C Accounting And Tax Services
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Earned Income Credit

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