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Date: December 3, 2009

Bulletin Number: 947

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Subject

Agency Instructions for Employees Who Claim Advance Earned Income Tax Credit in the 2010 Calendar Year

Purpose

To ensure compliance with the IRS rules regarding Form W-5, Earned Income Credit Advance Payment Certificate.

Background

The Federal government provides either a paycheck credit or an income tax refund to employees who earn low or modest wages, provided eligibility requirements relating to annual income and family size are met.  Eligible employees have the option of receiving advance payment of Earned Income Tax Credit directly from their employer in the form of regular payments added to the employee’s paychecks.

All Form W-5s that were filed for the 2009 calendar year will expire on December 31, 2009.  Employees who are eligible for advance payments of their Earned Income Tax Credit in 2010 must file a new form with their employer. 

The 2010 Form W-5 and instructions can be obtained from the IRS website at www.irs.gov

Affected Employees

Employees who are eligible to receive advance Earned Income Tax Credit payments for 2010.

Effective Date(s)

All Form W-5s expire on December 31, 2009. 


OSC Actions

OSC will issue Control-D report, NTAX113, Reset W-5 EIC Report/Update.  This report identifies employees who currently claim Earned Income Tax Credit.

If the employee’s record is not updated by January 1, 2010, to reflect that a new Form W-5 has been received, OSC will update the employee’s Federal Tax Data pages and remove the Advance Earned Income Tax Credit.  This may have a monetary consequence for the employee, and result in decreased earnings.

Agency Actions

Agencies must review the Control-D report and request a new Form W-5 from each employee appearing on the report.  The new form must be received before the expiration date of December 31, 2009. 

If the agency does not receive a new Form W-5 for an employee by 12/31/09, the agency must update the employee’s Federal Tax Data page as follows:

  1. Navigate to Home > Compensate Employees > Maintain Payroll Data (US) > Use > Employee Tax Data.
  2. Select the Federal Tax Data page.
  3. Insert a new row with the effective date of 01/01/10.
  4. Under the Earned Income Credit field, click on the “Not Applicable” radio button.
  5. Under the W-5 Processing Status field, click on the “None” radio button.
  6. Save the page.

If the agency does receive a new Form W-5 for an employee, the agency must update the employee’s Federal Tax Data page by:

  • changing the Earned Income Credit field to the status indicated on the form;
  • changing the W-5 Processing Status field to “New W-5 Received;” and
  • saving the page. 
Agencies must use a future dated effective date of 01/01/10 for all Form W-5s received before the December 31, 2009 expiration date.

Questions

Questions regarding this bulletin or any Advance Earned Income Tax Credit issue may be directed to the Tax and Compliance mailbox.