Earned Income Credit

STATE OF NEBRASKA

STATE ACCOUNTING MANUAL

		Effective
		Date
EARNED INCOME CREDIT TABLES		3-25-09

DESCRIPTION: The appropriate policies and procedures for computing and paying advance Earned Income Credit (EIC) Payments. These payments are available to all eligible State employees who elect to receive advance EIC payments along with their wages. Such employees must file IRS Form W-5 with their agency payroll office for each year that the advance EIC payment is requested. Additional information on advance EIC payments may be obtained by acquiring Circular E, Employer's Tax Guide, from a local IRS office. W-5 Forms are also available from the same source.

The eligibility requirements for advance EIC are shown below as the Form W-5 is NOT being revised.

1. The employee's expected 2009 earned income and adjusted gross income must each be less than $35,463 ($40,463 if married filing jointly) for taxpayers with one qualifying child; $40,295 ($45,295 if married filing jointly) for taxpayers with two qualifying children; or $43,279 ($48,279 if married filing jointly) if you expect to have 3 or more qualifying children. The employee’s spouse’s income is included if filing a joint return.

2. If married, the employee must not file as married filing separately. The employee must file a joint return or qualify to file as head of household.

3. The employee must not claim the foreign earned income or housing expense exclusion, or the foreign housing expense deduction.

SCOPE: Applies to all State employees eligible for advance EIC payments.

PURPOSE: To ensure that any eligible employee wishing to receive the advance EIC payment may do so as required by law and to describe the correct NIS payment procedure.

AGENCY RESPONSIBILITIES:

1. Every Agency payroll office must have W-5 forms available for employees who want to apply for advanced EIC payments. Individual W-5 copies are available in the Payroll Section of the State Accounting Division. The agency must maintain the W-5 on file in the employee's personnel file, just as the W-4 forms are presently maintained. A new Form W-5 must be filed for each year the advance EIC payment is requested.

2. Agency payroll managers are responsible for exercising due care in accepting W-5's to ensure that only eligible State employees receive payments. Eligibility requirements are explained above and on the W-5 form.

3. The agency payroll managers are responsible for establishing, changing or deleting the advance EIC payments in NIS. Agency payroll managers should monitor the EIC payment process to ensure accuracy. This control can be accomplished by reviewing the pay cycle transactions and for year-to-date totals. Agency payroll managers must see that the advance EIC payments are adjusted accordingly for subsequent pay changes.

NAVIGATION: If you have the proper authorization.

1. Human Resources and Payroll Agency - Agency

2. Employee Maintenance

3. Employee Information

4. Find the employee using address book number

5. Choose the employee

6. Click Row - National Fiscal Data

7. Locate EIC Status [Earned Income Credit]

8. Click into the box at the right, and use the visual assist to select one of the following.

· B - Employee & Spouse

· M - Employee qualified without certificate

· N - Employe not qualified [default]

· Y - Employee qualified

9. Click OK on the Employee Information [National Fiscal Data - USA] window, the system will compute the deduction automatically based the above selection.

The following examples explain how to manually compute the deduction using tables from Circular E, Publication 15 if you wish to follow the logic used in the system.

EXAMPLE 1: Employee Johnson is single, expects to earn less than $29,201 this year, maintains a household, and has one dependent child living with her. Johnson's biweekly wages are $535.20 and she has filed a W-5 with her agency's representative requesting advance EIC payments starting July 1. Refer to the Earned Income Credit Tables - Biweekly Payroll Period, Single/Head of Household. It is found that Johnson's advance EIC payment is $56. Since there are only 13 pay periods remaining in the year, "13" would be entered in the "Number of Times To Be Taken" field.

EXAMPLE 2: Employee Brown is married and expects that his annual income, including his spouse's income, will not exceed $34,178. Brown has two dependent children under his care and plans on filing a joint return. Both he and his spouse filed W-5's requesting advanced EIC payments, starting April 1, with their respective employers. Brown's monthly pay rate is $850.25. Refer to the Earned Income Credit Tables - Monthly Payroll Period, Married with Both Spouses Filing Certificates. It is found that Brown's advance EIC payment is $39. Since Brown will be receiving the EIC payments for nine months, "9" would be entered in the "Number of Times To Be Taken" field.

The Internal Revenue Service has withholding tables for Federal Income Tax and Earned Income Credit. These tables are available at http://www.irs.gov/formspubs/index.html . Search for Earned Income Credit, may also be referenced in Publication.