THE EARNED INCOME TAX CREDIT

The Earned Income Tax Credit (EITC) is a tax credit offered through the federal tax system intended to reward work among low-income families, especially those with children. Those who qualify can pay less federal tax, or no tax, or get a tax refund. To qualify, you must meet certain rules and file a tax return, even you do not owe any tax or did not earn enough money to file a tax return.

In most cases, any EITC payments you receive will not be counted as income to determine eligibility for Medicaid, supplemental security income (SSI), food stamps, low-income housing, or most Temporary Assistance to Needy Families (TANF) payments. However, if you do not spend your EITC payment within a certain period of time, for TANF and Medicaid it may count as an asset (or resource) and affect your eligibility.

To qualify, the tax filer must meet the following criteria:

• Have a valid social security number;
• Cannot file taxes as "married filing separately;"
• Must be a U.S. citizen or a resident alien all year; or a nonresident alien married to a U.S. citizen or a resident alien and filing a joint return;
• Cannot file Form 2555 "Foreign Earned Income" or Form 2555-EZ;
• Cannot have an investment income of more than $2,660 for 2003 tax returns; and,
• Must have earned income from employment or self- employment.

You also must meet certain income requirements. For 2003 tax returns, both earned income and adjusted gross income must have been:

• less than $29,966 for a taxpayer with one qualifying child
  ($30,666 for married filing jointly) are eligible for a credit of up to $2,547;
• less than $33, 692 for a taxpayer with more two or more qualifying child
  ($34,692 for married filing jointly) are eligible for a credit of up to $4,204;
• less than $11,230 for a taxpayer with no qualifying children
  ($12,230 for married filing jointly) are eligible for a credit of up to $382.

It is possible to receive advance payment of next year's EITC throughout the year, rather than wait and get the credit after your tax return. If you have a qualifying child, you may be able to get some of the EITC in your paycheck. Request Form W-5 "Earned Income Credit Advance Payment Certificate" from your employer.

Please note that EITC rules and income levels are subject to change each tax year. For more information, see the worksheet in the instructions for the tax form you file, call the nearest IRS office (listed in the yellow pages).