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Need Some Deductions for 2011?

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10 Oddball Tax Deductions

11 Most Overlooked Tax Deductions

Updated for 2011

Advance Earned Income Credit

What is the Earned Income Credit?

The earned income credit is geared toward lower income taxpayers with at least one qualifying child.

A taxpayer with no  children may also be eligible for the credit depending on his/her income.

Generally, a taxpayer may claim the earned income credit annually on Form 1040, 1040A, or 1040EZ.

However, instead on waiting to claim the credit once each year, an employee may choose to have a portion of it included with his regular pay during the year.

These advance payments are called advance earned income credit payments.

Advance Earned Income Credit Payments

Notification:

You, as the employer, must advise each new employee of his/her right to receive advance earned income credit payments.

Form W-5

To receive advance earned income credit payments, the employee must complete  Form W-5.

By answering the questions on Form  W-5 the employee will find out if he/she is eligible to receive advance earned income payments.

It is the employee's responsibility to complete a new Form W-5 for any year the employee wishes to receive advance earned income credit payments. Form W-5 expires December 31 each year.

The top half of Form W-5 is kept by the employee.

The bottom half of Form W-5 is given to the employer.

Next:

Earned Income Credit: Maximum Advance Earned Income Credit Payment; Withholding Taxes; Advance Earned Income Credit Payments Treated as Tax Deposits; How Advance Earned Income Credit Payments are Provided to Employees

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