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William Perez

Saying Farewell to the Advance Earned Income Credit

By August 16, 2010

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2010 will be the last year for the advance earned income credit. This program, first enacted in 1978, enables lower-income taxpayers to receive a portion of their expected earned income credit in advance as an additional amount in their normal paycheck. The program will remain in effect through December 31, 2010. After that, taxpayers will no longer be able to receive advances of their earned income credit.

In 2008 (the last year for which data is presently available) 140,253 taxpayers reported receiving advanced earned income credit payments totalling $78,248,000. (IRS Statistics of Income, 2008 Individual Complete Report, section 1, table A, page 5, PDF.)

Elimination of the advanced earned income credit is part of HR 1586. This legislation provides funding to states to assist in hiring school teachers and to fund state Medicaid programs. To pay for those programs, Congress eliminated the advanced Earned Income Credit and tightened the rules regarding foreign tax credits.

The foreign tax credit is designed to help people and businesses avoid paying US tax on the same items of income that are also taxed in a foreign country. Some taxpayers, however, utilized a splitting strategy to defer reporting foreign income while at the same time taking a foreign tax credit in the US against this deferred income. HR 1586 tightens rules relating to the accounting of foreign income, foreign subsidiaries and the use of tax treaties to prevent the misuse of the foreign tax credit.

Additional resources: HR 1586 (at the Library of Congress), President Signs Foreign Tax Reforms to Fund Education / Medicaid (from publisher CCH)

Comments
August 23, 2010 at 8:30 pm
(1) Real Estate Tax Tips says:

Probably not such a bad idea to see this expire. It was probably under utilized in the past.

September 22, 2010 at 10:33 pm
(2) Barbara Ruge says:

This really screws me. I pay $130 biweekly for insurance, and spend $115 per month out of pocket for medications for myself and my daughter. I am a single mother making $29,500 per year. I don’t get child support. My ex is disabled. I used this $35 biweekly to make expenses. I also claim all my allowences during the year to make it. Now I don’t know how I’m going to make it.

January 4, 2011 at 7:26 am
(3) Marie says:

This has come as a surprise to tjhose of us who really counted on the extra income. We get no cost of living raise, barely a yearly raise making less than 22,000 a year for a family of 3. How are we suppose to survive? This is very disappointing and sad.

January 18, 2011 at 11:31 pm
(4) J says:

This came as a big shock to me, I have been using this for the past 2 years now, and it has really helped me get by. I dont even make 20k a year, and have 2 kids to support and no other source of income. This new year is going to be a bit harder especially with my oldest starting school and needing uniforms, but hopefully I will be able to put off a few things I wanted to get with my income tax, like a new dining table, and make it through the year.

March 24, 2011 at 11:45 pm
(5) Ron says:

Sorry to the people that EIC helps,but I have a step daughter that won’t get a real job, because of all the assitates.She got 8000.00,child care,medical coverage for her and her three kids,food stamps,housing.If she get a real job,she will pay more for child care,lose her medical and housing and food stamps.Just like my generation,that didn’t get this kind of help,we struggled.This EIC makes people not want to work and the rest of us pay for it.This generation wants it all now,and not work for it,like my generation did.No wonder the deficit is out of sight.Time to stop this give away.Just like everything else,only takes a few to ruin it for everyone else,besides being to generous.Most tax payer don’t have any idea about this.

February 6, 2012 at 1:56 pm
(6) R.D. says:

Hey Ron,
Just curious, may I ask…If you actually think that overall persons including your daugher utilizing government subsides are lazy and don’t want to work -in some cases this is true. What do you think of Wall Street bankers, and etc. who received gov’t subsidies in upward of 700Billion to replace the money that was squandered in what should be unethical practices to sell (bank loans and …. that you know are no good and etc.) No remember these men and women don’t live in meager housing, or receive snap or medicaid. But they do live in mansions, have, plans, trains and automobiles that are worth 100X more than 8,000 a month. What do you think of Wall Street bankers and who would you
rather receive gov’t subsidies and why?

May 4, 2012 at 2:10 pm
(7) Mary b says:

Well this has screwed me in a big way :(

January 15, 2013 at 4:45 pm
(8) Maelstrom says:

Ron, you have no clue what you are talking about. The whole point of the Advanced EIC was for families to receive partial amounts of their own money they worked for in the first place instead of letting the government keep it all year with no interest.

Maybe you enjoy having the government keep your hard earned money all year with no interest, but some of the rest of us enjoyed getting a little bit of our hard-earned money back in our pay-checks we worked hard for instead of wating all year.

January 12, 2014 at 3:33 pm
(9) jm says:

If your working for say 10 an hour and that’s not enough, try getting an education. Perhaps have children with a husband instead of any donor you can find.

February 17, 2014 at 1:38 pm
(10) jack says:

Wow Jim, you are obviously not educated because educated people would give valid points and not go off ranting about nothing. I don’t mind a debate or difference of opinions but saying things like that ruin this whole forum. Do yourself a favor and quit ruining good debates with nonsence.

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