02-P-029 New Tables for Earned Income Credit for 2002 (Supersedes 01-p-023)
|DATE:||December 20, 2001|
|SUBJECT:||New Tables for Earned Income Credit for 2002|
|EFFECTIVE DATE:||January 1, 2002|
|CONTACT:||Roger Basinger||(785) 296-5387||(email@example.com)|
|SUMMARY:||New Earned Income Credit Rates Effective for Paychecks Issued On or After January 1, 2002|
The Internal Revenue Service (IRS) has issued the new percentage tables for computing the advance earned income credit (EIC) payments effective for all paychecks issued on or after January 1, 2002. The attached tables have been prepared for use in computing all EIC payments for wages paid on or after January 1, 2002. When calculating EIC by annualizing, 26 pay periods should be used to arrive at an annualized amount.
The Internal Revenue Service has released the 2002 Form W-5, Earned Income Credit Advance Payment Certificate. A copy of the 2002 Form W-5 is attached; the 2001 Form W-5 expires on December 31, 2001. The 2002 Form W-5 must be filed with the employer before advance 2002 payments can begin. Generally, employees have to successfully answer questions listed on page 2 on Form W-5 in order to be eligible for advance payments. In addition to meeting other criteria, advance EIC qualifiers must have at least one qualifying child and expect that 2002 earned and adjusted gross income will each be less than $29,201.00 for single employees or $30,201.00 if filing jointly (include spouses income if filing jointly). Employees cannot claim the EIC if planning to file either Form 2555 or Form 2555-EZ (relating to foreign earned income). Finally, a nonresident alien may not claim the EIC for 2002 unless married to an U.S. citizen or resident and elects to be taxed as a resident alien for all of 2002.
Beginning in 2002, the IRS has established the following three employee status categories: (a) Single or Head of Household, (b) Married Without Spouse Filing Certificate, and (c) Married With Both Spouses Filing Certificate. Married employees must indicate on Form W-5 if their spouse receives advance EIC payments. Please note that the IRS created the new 'Married Without Spouse Filing' category and issued the new tables in late December 2001. Because of this change, no updates are currently available to the SHARP system to reflect the new category and rates. Agencies are advised to continue to use the 'Single or Married Without Spouse Filing' selection on the employee's Federal Tax Data 2 panel (Compensate Employees/Maintain Payroll Data U.S./Use/Employee Tax Data) for employees who qualify for the 'Married Without Spouse Filing Certificate' status. Agencies are also advised that the difference in rates between the 'Single or Head of Household' status and 'Married Without Spouse Filing Certificate' status is minimal. Once the programming changes have been made to SHARP for the new 'Married Without Spouse Filing Certificate' status and rates, agencies will be notified and qualified employees can be assigned to the new status for all remaining paychecks issued in 2002.
The Department of Administration updated the existing SHARP federal tax data records on December 17, 2001, for all employees claiming the EIC in 2001 to reflect an Earned Income Credit status of 'Not applicable'. The tax data record updates are effective January 1, 2002. On-line agencies must enter a new effective-dated row into SHARP for employees who wish to claim the EIC in calendar year 2002; paper agencies should submit an employee data sheet to the Division of Personnel Services for employees who wish to claim the EIC in 2002. The new tax dated row should be added effective January 2, 2002 and will need to be entered into SHARP by 5:00 p.m. on Friday, December 28, 2001 in order to be reflected in the on-cycle paycheck dated January 4, 2002. Please refer to the Employee Payroll Tax Data section of the Payroll module in the on-line CBT (Computer Based Training) for specific instructions on entering employee tax data information.
The Division of Accounts and Reports provided a listing to agencies, which identifies all employees whose EIC status was updated in SHARP on December 17, 2001. The listing includes department, employee ID, name, SSN, and EIC exempt status.
The Department of Administration will make all of the necessary changes in the computation of EIC for SHARP agencies. Regent's institutions are responsible for implementing the new EIC rates in their respective payroll systems.
Advanced Earned Income Credit Formulas,
W-5 Earned Income Credit Advance Payment Certificate (.pdf)