Advanced earned income credit refers to a portion of the earned income credit an employee can receive through their paycheck. The earned income credit was a tax credit some employees receive when their income was below a certain level.
How Did Advanced Earned Income Credit Work?
In order to give the advanced earned income credit, employers had to deduct federal income, Social Security and Medicare taxes from their employees’ paychecks to make the payments.
Why Was Advanced EIC Replaced?
Advanced EIC was replaced because the positive impacts of the program were fairly insignificant since it was used by less than 3% of eligible taxpayers.
Administrative problems and non-compliance errors were also issues that pushed the government to repeal advanced EIC.
What Are the Challenges of Advanced Earned Income Credit?
The challenges advanced earned income credit was facing include administrative problems and non-compliance errors.
For example, 80 percent of advance earned income credit beneficiaries did not meet one of the program’s qualifying standards.
What Was Advanced EIC Replaced By?
Nothing has replaced the advanced EIC program. The earned income credit still remains and low-income workers can receive the money after having filled their W-5 form.