Earned Income Tax Credit, sometimes called the Earned Income Credit (EITC), is a refundable Federal income tax credit for low-income working individuals and families. The credit reduces the amount of Federal tax you may owe and can result in a refund check. Here's how it works: When the EITC you claim (if you qualify) exceeds the amount of taxes you owe, you get a tax refund on your taxes.

Income and family size determine the amount of the EITC. To qualify for the credit, both your earned income and modified adjusted gross income for 2001 must be less than $28,281 for a taxpayer with one qualifying child, $32,121 for a taxpayer with more than one qualifying child, and $10,710 for a taxpayer with no qualifying children.

The EITC Eligibility Checklist on the last page of IRS' Publication 596, Earned Income Credit, may be used to quickly determine eligibility for the credit.

The taxpayer may figure the credit by using a special worksheet included as part of the EITC instructions in the 1040, 1040A, and 1040EZ tax packages. Instructions in these packages require some taxpayers to use a worksheet in Publication 596 instead of the worksheet in the tax package.

For 2002, some employees with at least one child living with them may be entitled to receive advance EITC payments in their paychecks. The employee must file Form W-5, Earned Income Credit Advance Payment Certificate, with an employer to receive the advance payments. The employer then pays part of the credit to the employee in advance throughout the year. The taxpayer claims the rest when filing the 2002 Federal tax return.

The EITC does not generally affect eligibility for Medicaid, Supplemental Security Income (SSI), food stamps, or low-income housing.

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