What is IRS form W-5
IRS form W-5
The IRS Form W-5 is also known as the Earned Income Credit Advance Payment Certificate. This form was previously used by employees who wanted to get a portion of their Earned Income Credit (EIC) in advance, along with their pay.
While IRS Form W-5 was once commonly used, it's no longer in use. The last year the Earned Income Credit could be received was in 2010. Today, eligible employees simply need to file their individual tax returns to get the Earned Income Tax Credit (EITC).
What was the IRS Form W-5 for?
The W-5 is an obsolete form that's no longer used or accepted by the Internal Revenue Service (IRS). But what was it used for in the past? It was related to Earned Income Credit.
Eligible employees could submit a Form W-5 and receive a portion of their Earned Income Credit in advance, along with their usual pay. While eligible employees can still claim their Earned Income Credit, they have to wait to claim it until the end of the year, when they file their Individual Income Tax Return, or IRS Form 1040.
Why is the W-5 form no longer used?
In 2010, United States tax rules changed. President Obama signed the Education Jobs and Medicare Assistance Act on August 10, 2010, which repealed the Advanced Earned Income Credit. The repeal took effect with the 2011 tax year.
As a result, eligible individuals can no longer elect to receive their Earned Income Credit in advance through their paycheck. They have to wait until they've filed their annual individual tax return (Form 1040).
Who was the W-5 for?
IRS Form W-5 was relevant to employees and was filed by the employee, not the employer. An employee could only have one Form W-5 per current employer. The eligible employee could submit the W-5 form to the IRS and get an advance on their Earned Income Credits without having to wait to file their Form 1040 for that tax year.
Who was eligible to file IRS Form W-5? Any employee who was eligible to claim Earned Income Credits was eligible to file IRS Form W-5. To determine eligibility, the form required individuals to provide details like:
- Marital status: For example, single versus married.
- Filing status: For example, filing as a single individual, married person, head of household, joint return, or qualifying widow with a dependent child.
- Details regarding any qualifying child: The form specified terms for a qualifying child, such as being under a certain age and living with the filing individual.
Is it still possible to claim Earned Income Credits?
The Earned Income Credit, now more commonly referred to as the Earned Income Tax Credit, is still available today. The IRS has two sets of qualifying rules for the EITC: basic and special.
In the basic category, to qualify for the EITC, you must:
- Have worked and earned less than $59,187 (this amount is adjusted annually)
- Have investment income of less than $10,300 for that tax year
- Have a valid Social Security number
- Have not filed Form 2555: Foreign Earned Income
- Be a U.S. citizen or a resident alien for the entirety of that tax year
There are also certain criteria you have to meet if you're separated from your spouse and not filing a joint tax return.
Additionally, the IRS has special qualifying rules for members of certain groups, such as:
- Members of the military
- Members of the clergy
- Taxpayers with disabilities or having relatives with disabilities
The IRS has more details about who is and isn't eligible for the Earned Income Tax Credit on their website. They also have an electronic assistant to help you determine if you can apply for this type of tax credit.
What document replaced the W-5 form?
IRS Form W-5 wasn't replaced by any specific document. Because the legislation around advanced Earned Income Credits changed entirely—making it impossible to receive advanced EIC—there was no need for an alternative document to claim advanced credits.
Now employees who are eligible for Earned Income Tax Credits simply complete their individual tax return. Depending on the individual, this could be IRS Form 1040: U.S. Individual Income Tax Return or IRS Form 1040-SR: U.S. Tax Return for Seniors.
Eligible individuals with a qualifying child must also file Schedule EIC: Earned Income Credit and attach it to their Form 1040 or 1040-SR.
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