Wisconsin Works (W-2)
Earned Income Credit
The Earned Income Credit (EIC) is a tax credit available to qualified low-income workers. EIC helps low-income workers increase their annual income. It reduces the income tax a family owes, and at times, it provides a refund greater than taxes owed.
There are both federal and state programs. Both the IRS and Wisconsin Department of Revenue websites contain current information regarding the federal and state EIC programs.
Federal Earned Income Credit
Many Wisconsin Works (W-2) clients can benefit from the EIC program. EIC provides larger credits to families with qualifying children (e.g., sons, daughters, grandchildren, and adopted, step, and foster children) who reside with the taxpayer.
2006 Federal Income Limitations for Taxpayers - If the taxpayer has:
- No (0) qualifying children, they must earn less than $12,120, or $14,120 if married filing jointly.
- At least one (1) qualifying child, they must earn less than $32,001, or $34,001 if married filing jointly.
- Two or more qualifying children, they must earn less than$36,348, or $38,348 if married filing jointly.
Amount of Federal Earned Income Credit - The actual tax credit amount an applicant can receive is subject to a sliding scale based on annual earnings and the number of qualifying children. For example, applicants working full-time, using the above annual income limits, would receive a maximum federal credit of:
- $412 if they have no qualifying child, or
- $2,747 if they have one qualifying child, or
- $4,536 if they have two or more qualifying children.
Taxpayers can receive the credit as a lump sum when they file IRS Income Tax Return Forms 1040, 1040A, or 1040EZ. Filers with a qualifying child must attach Schedule EIC.
Advance Federal Earned Income Credit (AEIC) - The federal EIC program also allows taxpayers with qualified children to collect up to 60 percent of eligible EIC benefits distributed evenly over each pay period during the year. Eligible taxpayers must fill out IRS Form W-5 and give it to their employer to obtain the AEIC. Additional guidance, including an EIC tax (calculator) assistant can be found on the following IRS EIC Website:
More information on the Federal EIC (IRS website)
State of Wisconsin Earned Income Credit
Annual income limitations for Wisconsin EIC are the same as the federal limitations. The credit maximum is $1,950 (in addition to the federal EIC payments. Payment rates equal a percentage of the federal EIC payment:
- One qualifying child, four percent of the federal EIC payment;
- Two qualifying children, 14 percent of the federal EIC payment;
- Three or more qualifying children, 43 percent of the federal EIC payment.
More information on the Wisconsin EIC (Wisconsin Department of Revenue website)
Other Tax Credits
Many low-income working families can be eligible for the federal Child Tax Credit . The Child Tax Credit is a federal benefit worth up to $1,000 for each dependent child under age 17. This credit is determined on federal tax forms 1040 or 1040A. More information on the federal child credit is available at the IRS website. (PDF file)
Also, many low-income working families will qualify for the Wisconsin Homestead Credit. This credit is for both homeowners and renters. Households with incomes less that $24,500 may be eligible for a credit up to $1,160. People who reside in mobile homes or nursing homes who paid property taxes also may qualify. Taxpayers can claim this credit by filing a Schedule H form or new Schedule H-EZ. Both forms can be filed with a Wisconsin tax return or it can be submitted separately. See the Homestead Credit web site at the Wisconsin DOR for further information on claiming the Homestead Credit and which form to use.
Free Tax Preparation Help
Tax preparation assistance volunteers can help taxpayers at Volunteer Income Tax Assistance (VITA) sites in Wisconsin open from February 1 through April 16. For the location of any VITA sites or to find other information on the VITA program, visit the Wisconsin DOR VITA web site or call the IRS at 1-800-829-1040 for VITA site locations and other federal tax-related questions.