This is a credit applicable to low-income workers who may or may not have one or more qualifying children living with them. If you can take the Earned Income Credit, it is subtracted from the tax owed. The credit can be refunded even if you do not owe any tax.

If you had a qualifying child living with you during the tax year, you could be entitled to a refundable credit of up to $2,547 if your earned income and your adjusted gross income were less than $29,666 ($30,666 if Married Filing Jointly). If you had more than one qualifying child living with you, you could be entitled to up to $4,204 if your earned income and your adjusted gross income were less than $33,692 ($34,692 if Married Filing Jointly). If you have no qualifying children (or no children at all) you are eligible for a maximum $382 credit if your earned income and adjusted gross income were less than $11,230 ($12,230 if Married Filing Jointly). You must have lived in the United States for more than half of 2004 and be at least age 25 but under age 65 at the end of the year.

Rules for the Earned Income Credit:
To qualify for Earned Income Credit, you must meet all of the requirements:

You must have earned income-

• Your earned income and your adjusted gross income must both be less than $11,230 ($12,230 if filing a joint return) if you have no qualifying children.
• You cannot be the qualifying child of another person or be claimed as a dependent on another return.
  If qualifying children are used for the credit, they must have lived with you in the U.S. for more than six months.
• You (and your spouse if Married Filing Jointly) must have a Social Security number that allows you to work (your Social Security card cannot say "not valid for employment").
• You must include on your return the Social Security number of each person you claim as a qualifying child on Schedule EIC, Earned Income Credit.
• Your filing status cannot be Married Filing Separately.
• You must have lived in the United States for more than half of 2004. Members of the military on extended active duty outside the United States are considered to be in the United States during the duty period.
• You must not have filed Form 2555, Foreign Earned Income, or Form 2555-EZ, Foreign Earned Income Exclusion.
• Generally, if you have more than $2,600 of investment income (i.e., interest, dividends, net income from rent, net capital gain and net passive income that is not self-employment income), you will not qualify for the Earned Income Credit.

To qualify for the Earned Income Credit, you must meet all of the requirements. Even if you are not required to file a return because you did not earn enough last year, you may still qualify for the Earned Income Credit. However, to get the credit, you must file a return and be able to meet all the rules.

Tie-Breaker Rules If More Than One Person Can Claim the Credit
Your qualifying child cannot be used by more than one person to claim the Earned Income Credit. If the child is the qualifying child for you and another person and you cannot agree who will claim the Earned Income Credit using that child, you must apply the IRS tie-breaker rules to determine who can claim the credit. If more than one person claims the credit using the same child, the IRS will apply the tie-breaker rules. The Earned Income Credit qualifying child tie-breaker rules are applied in the following order:

• If only one of you is the child's parent, the parent is the only one who can receive the credit for that child.
• If both of you are the child's parents, the parent the child lived with the longest during the year is the one who can receive the credit for that child.
• If both of you are the child's parents and the child lived with both equally, the parent with the higher adjusted gross income is the one who can receive the credit for that child.
• If neither of you is the child's parent, the one with the higher adjusted gross income is the one who can receive the credit for that child.

Earned Income Credit - No Qualifying Children
You may still be eligible for a maximum credit of $382 if you do not have a qualifying child, you met all of the rules listed in the Rules for Earned Income Credit section, and all of the following apply:

You (or your spouse if filing a joint return) were at least age 25 but under age 65 at the end of 2004
You (or your spouse if filing a joint return) are not claimed as a dependent on someone else's 2004 return
Your (or your spouse's, if filing a joint return) home was in the United States for more than half of 2004

How Does the Advance Earned Income Credit Work?
If you qualify for the EIC, you can file Form W-5, Earned Income Credit Advance Payment Certificate, with your employer. Your employer then gives you part of the basic credit in each paycheck.

If at any time during the year your circumstances change and you are no longer eligible for EIC, you will have to repay the amount advanced to you when you file your return. To stop the advance payments, you must complete a new Form W-5 and give it to your employer. If you receive advance EIC, you must file a return even if it is not otherwise required.

Earned Income Credit - Fraudulent or Reckless Claim
You will not be eligible for the Earned Income Credit if the IRS has determined that you have previously claimed the credit fraudulently or recklessly. A fraudulent claim results in a 10-year loss of eligibility. A reckless claim results in a two-year loss of eligibility.

Earned Income Credit Certification Pilot Program
If you claimed the Earned Income Credit with a qualifying child last year, the IRS may have selected you to participate in the Earned Income Credit certification pilot program for tax-year 2004. If you were selected for the program, IRS would have notified you by mail and included a Form 8836, Qualifying Children Residency Statement. Form 8836 is used to show that you and your qualifying child met the Earned Income Credit residency requirement.

If you received Form 8836, you must file the form with the IRS if you are claiming Earned Income Credit based on a qualifying child for tax-year 2004. If you are required to file the form but do not, the IRS will not allow the Earned Income Credit based on a qualifying child for tax-year 2004.

Do not file Form 8836 in the following situations:

• You received the form but you and your child do not meet the residency requirement.
• You received the form but you are not claiming the Earned Income Credit with a qualifying child for tax-year 2004.
• You did not receive the form; therefore, you were not selected to participate in the pilot program