Earned Income Credit (EIC)
The Earned Income Credit (EIC) is a federal tax credit for low- to moderate-income workers. ProPay previously supported Advance EIC payments through payroll, but the IRS eliminated the advance payment option after 2010. ProPay disabled the Advance EIC feature in April 2011. Eligible employees now claim the full EIC when they file their annual tax return.
What Changed
The Education Jobs and Medicaid Assistance Act of 2010 (Public Law 111-226, Section 219) eliminated the Advance Earned Income Credit program effective for tax years after 2010. Before this change, employers could include advance EIC payments in employee paychecks based on the employee's W-5 filing. This option is no longer available.
| Date | Event |
|---|---|
| Before 2011 | Employers could process Advance EIC payments through payroll using IRS Form W-5 |
| January 2011 | IRS eliminates Advance EIC for tax years after 2010 |
| April 2011 | ProPay disables the Advance EIC feature |
How Employees Claim the EIC
Employees who qualify for the Earned Income Credit now claim it when filing their annual federal tax return (Form 1040). The credit is calculated and applied by the IRS, not through payroll.
Employer responsibilities:
- Notify eligible employees. The IRS requires employers to notify employees who had no federal income tax withheld that they may be eligible for the EIC. Use IRS Notice 797 or include the information on the employee's Form W-2.
- No payroll action required. You do not need to calculate, withhold, or advance any EIC amounts through ProPay.
> Tip: For current EIC eligibility rules, income limits, and credit amounts, see IRS Earned Income Tax Credit.
Legacy EIC Fields in ProPay
You may notice references to EIC in older ProPay data:
- Employee Special Information dialog — The EIC table selection field exists but is disabled. The default value is "N" (None) for all employees.
- Net pay formula — ProPay's internal calculation still includes an EIC variable, but its value is always zero.
- PREICTBL.DBF — The EIC lookup table file still exists in the data directory but is not used.
These remnants have no effect on payroll calculations. No action is required.
Related Topics
- Federal Taxes — Form 941 — Quarterly federal tax reporting
- Year-End Tax Filing Reminders — Annual tax filing checklist
- E-File W-2s — Electronic W-2 filing
- Tax Resource Links — Links to IRS and state tax resources