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Publication #FE394

2017 Handbook of Employment Regulations Affecting Florida Farm Employers and Workers: Earned Income Tax Credit [Federal]1

Fritz Roka, Michael Olexa, Carol Fountain, and Jessica Fernandez2

Purpose

Provides qualified employees with earned income tax credits for their tax returns or advanced payments throughout the year.

Who Must Comply

All employers must pay Advance Earned Income Tax Credit if the employee is eligible and requests payment.

Exemptions

Employers who pay agricultural workers on a daily basis are not required to pay advance earned income tax credit.

Employer Responsibilities

Employers must notify employees not having income tax withheld that they may be eligible for earned income tax credits.

If requested by the employee, the employer must provide Form W-5 (Earned Income Credit / Advance Payment Certificate) which is available at the nearest Internal Revenue Service (IRS) office or post office. Once the employer has given notice, there is no further responsibility unless employee chooses to select the earned income tax credit.

If the employee selects advance earned income tax credit and files a Form W-5, the employer must

  • Compute employee's gross pay (for agricultural employees, gross pay is interpreted as those wages subject to Social Security and Medicare Taxes).

  • Compute employee's Social Security, Medicare, and Withholding Tax.

  • Refer to tables in IRS Circular E (Employer's Tax Guide) and compute Advance Earned Income Tax Credit payment based on employee's gross pay for pay period.

  • Add Advance Earned Income Tax Credit to employee's pay for pay period.

  • Show the amount of Advance Earned Income Tax Credit payments during the year on employee's Form W-2 (Wage and Tax Statement).

  • Retain all records of Advance Earned Income Tax Credit payments for four years. These records should include the following: copy of employee's Form W-5, amount and date of employee's earnings, dates of employee's employment, dates and amount of tax deposits made, and copies of returns filed.

On Form W-5, the employee must indicate marital status and whether the spouse has a Form W-5 in effect for the year. If the employee indicates the spouse has a Form W-5 in effect, the employer will use the table titled Married with Both Spouses Filing Certificate.

Employers must file the appropriate forms with the IRS: Form 941 (Employer's Quarterly Tax Return) for non-farm packinghouses/canners/ processors, or Form 943 (Annual Tax Return for Agricultural Employers).

Employers must also file Form W-3 (Transmittal of Income and Tax Statements) annually, by February 28th, accompanied by a Form W-2 for each individual employee to the Social Security Administration (see EDIS document FE415, Social Security and Medicare [Federal]).

Employer Reimbursement

Employers are reimbursed by the IRS for Advance Earned Income Tax Credit payments as follows:

  • The employer deducts the amount of the Advance Earned Income Tax Credit payment from total liability for withholding taxes when remitting funds to IRS.

  • If the Federal Income taxes withheld are insufficient to cover the amount of the Advance Earned Income Tax Credit payments to the employees, the employer may deduct the excess from employee's contribution to Social Security and Medicare.

  • If there is still an excess of Advance Earned Income Tax Credit payments, the employer may deduct the excess from employer's contribution to Social Security and Medicare.

  • If, for any payroll, the Advance Earned Income Tax Credit payments are more than the withheld income tax and the Social Security and Medicare taxes (including employer's share of Social Security and Medicare taxes), the employer may either (1) reduce each Advance Earned Income Tax Credit payment proportionately or (2) make full payment of Advance Earned Income Tax Credit amount and have full amounts treated as an advance payment of employer's tax liability.

Employee Eligibility

The eligibility requirements for Advance Earned Income Tax Credits are detailed on Form W-5:

  • The employee's expected earned income and adjusted gross income must each be less than $14,820 ($20,330 for married filing jointly) for families with no children, and must be less than $39,131 ($44,651 for married filing jointly) if there is one child. For two children, earned income must be less than $44,454 ($49,974 for married filing jointly), and for families with more than two children, income must be less than $47,747 ($53,267 for married filing jointly). (These figures change annually. Check with the IRS.)

  • The employee generally must have a biological or adopted child living at home more than half the year (the entire year for a foster child).

  • If married, the employee must file a joint tax return or, if eligible, file as head of household and have a qualifying child.

  • The employee and any spouse must be at least twenty-five years of age but under the age of sixty-five.

  • Employees are ineligible for any program benefits if income from investments (dividends and interest) exceeds $3,400 in a given year.

  • The employee must file a Form W-5 with the employer. The employee is solely responsible for determining eligibility when filing a Form W-5.

  • The employee must not have foreign earned income, must file an annual tax return (Form 1040), and must expect to be eligible for Advance Earned Income Tax Credits the following year.

Responsible Agency

Department of the Treasury
International Revenue Service
Washington, D.C. 20224
http://www.irs.ustreas.gov

For online information, search at irs.gov for your city and state (for Florida cities: https://www.irs.gov/uac/contact-my-local-office-in-florida). For toll-free information, dial 1-800-829-1040.

Footnotes

1.

This is EDIS document FE394, a publication of the Department of Food and Resource Economics, UF/IFAS Extension. Published 2003, revised 2009 and 2017. This handbook is produced and distributed by the UF/IFAS Center for Agricultural and Natural Resource Law. Originally published by Leo Polopolus. Visit the EDIS website at http://edis.ifas.ufl.edu.

2.

Fritz Roka, associate professor, Food and Resource Economics Department, UF/IFAS Extension, Southwest Florida Research and Education Center, Immokalee, FL. Michael Olexa, professor, Food and Resource Economics Department, and director, Center for Agricultural and Natural Resource Law UF/IFAS Extension, Gainesville, FL. Carol Fountain, editor, Food and Resource Economics Department, UF/IFAS Extension, Gainesville, FL. Jessica Fernandez, graduate student, Levin College of Law, University of Florida, Gainesville, FL.

This document is designed to provide accurate, current, and authoritative information on the subject. However, since the laws, administrative rulings, and court decisions on which it is based are subject to constant revision, portions of this publication could become outdated at any time. This publication is distributed with the understanding that the authors are not engaged in rendering legal or other professional advice, and the information contained herein should not be regarded as a substitute for professional advice. For these reasons, the utilization of these materials by any person constitutes an agreement to hold harmless the authors, the Institute of Food and Agricultural Sciences, and the University of Florida for any liability claims, damages, or expenses that may be incurred by any person as a result of reference to or reliance on the information contained in this publication.


The Institute of Food and Agricultural Sciences (IFAS) is an Equal Opportunity Institution authorized to provide research, educational information and other services only to individuals and institutions that function with non-discrimination with respect to race, creed, color, religion, age, disability, sex, sexual orientation, marital status, national origin, political opinions or affiliations. For more information on obtaining other UF/IFAS Extension publications, contact your county's UF/IFAS Extension office.

U.S. Department of Agriculture, UF/IFAS Extension Service, University of Florida, IFAS, Florida A & M University Cooperative Extension Program, and Boards of County Commissioners Cooperating. Nick T. Place, dean for UF/IFAS Extension.