The advance earned income tax credit: IRS education effort picks up speed.

Under section 32 of the Internal Revenue Code, certain low-income individuals and couples may claim a refundable credit against the tax on their earned income. In addition, eligible taxpayers can receive the credit ratably throughout the year, by having their withholding adjusted. The Internal Revenue Service has undertaken to make more taxpayers aware of their eligibility for the earned income tax credit (EITC) and also to educate employers of their obligation to make the advance EITC available to their employees. To facilitate the IRSs educational effort, both the IRS and the Center on Budget and Policy Priorities have prepared a series of background materials on the EITC and advance EITC. The questions and answers below are drawn from their materials.

Although applications for the advance EITC (through the filing of Form W-5) are likely to be coordinated through a company's human resources (or personnel) department, the tax department may well play an important role in ensuring compliance with the law. Members of TEI should know that the IRS has appointed Taxpayer Education Coordinators in each district, who can assist businesses in making their employees aware of the EITC. Individuals wishing the name and telephone number of their local Taxpayer Education Coordinator should call their local IRS office or TEI Headquarters. In addition, this article can be duplicated and distributed freely throughout the workforce.

What Is the Earned Income Tax Credit?

The EITC is a special tax benefit for working people who earn low or moderate incomes. It has several important purposes: to reduce the tax burden on these workers, to supplement wages, and to make work more attractive than welfare. Workers who qualify for the EITC and file a federal tax return can obtain a refund of some or all of the federal income tax that was withheld from their paychecks during the year. They may also get extra cash back from the IRS. Even workers whose earnings are too small to have paid taxes can qualify the EITC. What's more, the EITC reduces any additional taxes workers may owe.

Who Can Get the EITC

and How Much Is It Worth?

* Single or married people who worked full or part time at some point in 1994 can qualify for the EITC, depending on their income.

* Workers who were raising one child in their home and had family income of less than 23,755 in 1994 can receive an EITC of up to $2,038.

* Workers who were raising more than one child in their home and had family...