Internal Revenue Code:Sec. 3507. Advance payment of earned income credit
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Location in Internal Revenue Code
TITLE 26 - INTERNAL REVENUE CODE
Subtitle C - Employment Taxes
CHAPTER 25 - GENERAL PROVISIONS RELATING TO EMPLOYMENT TAXES
Statute
Sec. 3507. Advance payment of earned income credit
(a) General rule
Except as otherwise provided in this section, every employer
making payment of wages to an employee with respect to whom an
earned income eligibility certificate is in effect shall, at the
time of paying such wages, make an additional payment to such
employee equal to such employee's earned income advance amount.
(b) Earned income eligibility certificate
For purposes of this title, an earned income eligibility
certificate is a statement furnished by an employee to the employer
which -
(1) certifies that the employee will be eligible to receive the
credit provided by section 32 for the taxable year,
(2) certifies that the employee has 1 or more qualifying
children (within the meaning of section 32(c)(3)) for such
taxable year,
(3) certifies that the employee does not have an earned income
eligibility certificate in effect for the calendar year with
respect to the payment of wages by another employer, and
(4) states whether or not the employee's spouse has an earned
income eligibility certificate in effect.
For purposes of this section, a certificate shall be treated as
being in effect with respect to a spouse if such a certificate will
be in effect on the first status determination date following the
date on which the employee furnishes the statement in question.
(c) Earned income advance amount
(1) In general
For purposes of this title, the term ''earned income advance
amount'' means, with respect to any payroll period, the amount
determined -
(A) on the basis of the employee's wages from the employer
for such period, and
(B) in accordance with tables prescribed by the Secretary.
In the case of an employee who is a member of the Armed Forces of
the United States, the earned income advance amount shall be
determined by taking into account such employee's earned income
as determined for purposes of section 32.
(2) Advance amount tables
The tables referred to in paragraph (1)(B) -
(A) shall be similar in form to the tables prescribed under
section 3402 and, to the maximum extent feasible, shall be
coordinated with such tables, and
(B) if the employee is not married, or if no earned income
eligibility certificate is in effect with respect to the spouse
of the employee, shall treat the credit provided by section 32
as if it were a credit -
(i) of not more than 60 percent of the credit percentage in
effect under section 32(b)(1) for an eligible individual with
1 qualifying child and with earned income not in excess of
the earned income amount in effect under section 32(b)(2) for
such an eligible individual, which
(ii) phases out at 60 percent of the phaseout percentage in
effect under section 32(b)(1) for such an eligible individual
between the phaseout amount in effect under section 32(b)(2)
for such an eligible individual and the amount of earned
income at which the credit under section 32(a) phases out for
such an eligible individual, or
(C) if an earned income eligibility certificate is in effect
with respect to the spouse of the employee, shall treat the
credit as if it were a credit determined under subparagraph (B)
by substituting 1/2 of the amounts of earned income described
in such subparagraph for such amounts.
(d) Payments to be treated as payments of withholding and FICA
taxes
(1) In general
For purposes of this title, payments made by an employer under
subsection (a) to his employees for any payroll period -
(A) shall not be treated as the payment of compensation, and
(B) shall be treated as made out of -
(i) amounts required to be deducted and withheld for the
payroll period under section 3401 (relating to wage
withholding), and
(ii) amounts required to be deducted for the payroll period
under section 3102 (relating to FICA employee taxes), and
(iii) amounts of the taxes imposed for the payroll period
under section 3111 (relating to FICA employer taxes),
as if the employer had paid to the Secretary, on the day on
which the wages are paid to the employees, an amount equal to
such payments.
(2) Advance payments exceed taxes due
In the case of any employer, if for any payroll period the
aggregate amount of earned income advance payments exceeds the
sum of the amounts referred to in paragraph (1)(B), each such
advance payment shall be reduced by an amount which bears the
same ratio to such excess as such advance payment bears to the
aggregate amount of all such advance payments.
(3) Employer may make full advance payments
The Secretary shall prescribe regulations under which an
employer may elect (in lieu of any application of paragraph (2))
-
(A) to pay in full all earned income advance amounts, and
(B) to have additional amounts paid by reason of this
paragraph treated as the advance payment of taxes imposed by
this title.
(4) Failure to make advance payments
For purposes of this title (including penalties), failure to
make any advance payment under this section at the time provided
therefor shall be treated as the failure at such time to deduct
and withhold under chapter 24 an amount equal to the amount of
such advance payment.
(e) Furnishing and taking effect of certificates
For purposes of this section -
(1) When certificate takes effect
(A) First certificate furnished
An earned income eligibility certificate furnished the
employer in cases in which no previous such certificate had
been in effect for the calendar year shall take effect as of
the beginning of the first payroll period ending, or the first
payment of wages made without regard to a payroll period, on or
after the date on which such certificate is so furnished (or if
later, the first day of the calendar year for which furnished).
(B) Later certificate
An earned income eligibility certificate furnished the
employer in cases in which a previous such certificate had been
in effect for the calendar year shall take effect with respect
to the first payment of wages made on or after the first status
determination date which occurs at least 30 days after the date
on which such certificate is so furnished, except that at the
election of the employer such certificate may be made effective
with respect to any payment of wages made on or after the date
on which such certificate is so furnished. For purposes of
this section, the term ''status determination date'' means
January 1, May 1, July 1, and October 1 of each year.
(2) Period during which certificate remains in effect
An earned income eligibility certificate which takes effect
under this section for any calendar year shall continue in effect
with respect to the employee during such calendar year until
revoked by the employee or until another such certificate takes
effect under this section.
(3) Change of status
(A) Requirement to revoke or furnish new certificate
If, after an employee has furnished an earned income
eligibility certificate under this section, there has been a
change of circumstances which has the effect of -
(i) making the employee ineligible for the credit provided
by section 32 for the taxable year, or
(ii) causing an earned income eligibility certificate to be
in effect with respect to the spouse of the employee,
the employee shall, within 10 days after such change in
circumstances, furnish the employer with a revocation of such
certificate or with a new certificate (as the case may be).
Such a revocation (or such a new certificate) shall take effect
under the rules provided by paragraph (1)(B) for a later
certificate and shall be made in such form as the Secretary
shall by regulations prescribe.
(B) Certificate no longer in effect
If, after an employee has furnished an earned income
eligibility certificate under this section which certifies that
such a certificate is in effect with respect to the spouse of
the employee, such a certificate is no longer in effect with
respect to such spouse, then the employee may furnish the
employer with a new earned income eligibility certificate.
(4) Form and contents of certificate
Earned income eligibility certificates shall be in such form
and contain such other information as the Secretary may by
regulations prescribe.
(5) Taxable year defined
The term ''taxable year'' means the last taxable year of the
employee under subtitle A beginning in the calendar year in which
the wages are paid.
(f) Internal Revenue Service notification
The Internal Revenue Service shall take such steps as may be
appropriate to ensure that taxpayers who have 1 or more qualifying
children and who receive a refund of the credit under section 32
are aware of the availability of earned income advance amounts
under this section.
Sources
(Added Pub. L. 95-600, title I, Sec. 105(b)(1), Nov. 6, 1978, 92
Stat. 2773; amended Pub. L. 97-248, title III, Sec. 307(a)(3),
308(a), Sept. 3, 1982, 96 Stat. 589, 591; Pub. L. 98-67, title I,
Sec. 102(a), Aug. 5, 1983, 97 Stat. 369; Pub. L. 98-369, div. A,
title IV, Sec. 474(r)(30), title X, Sec. 1042(d)(3), (4), July 18,
1984, 98 Stat. 845, 1044; Pub. L. 99-514, title I, Sec. 111(d)(2),
(3), Oct. 22, 1986, 100 Stat. 2108; Pub. L. 101-508, title XI, Sec.
11111(c), Nov. 5, 1990, 104 Stat. 1388-412; Pub. L. 103-66, title
XIII, Sec. 13131(d)(4)-(6), Aug. 10, 1993, 107 Stat. 435; Pub. L.
103-465, title VII, Sec. 721(c), Dec. 8, 1994, 108 Stat. 5002.)
Miscellaneous
AMENDMENTS
1994 - Subsec. (c)(1). Pub. L. 103-465 inserted concluding
provisions.
1993 - Subsec. (b)(2) to (4). Pub. L. 103-66, Sec. 13131(d)(4),
added par. (2) and redesignated former pars. (2) and (3) as (3) and
(4), respectively.
Subsec. (c)(2)(B)(i), (ii). Pub. L. 103-66, Sec. 13131(d)(5),
added cls. (i) and (ii) and struck out former cls. (i) and (ii)
which read as follows:
''(i) of not more than the credit percentage under section
32(b)(1) (without regard to subparagraph (D) thereof) for an
eligible individual with 1 qualifying child and with earned income
not in excess of the amount of earned income taken into account
under section 32(a)(1), which
''(ii) phases out between the amount of earned income at which
the phaseout begins under section 32(b)(1)(B)(ii) and the amount of
income at which the credit under section 32(a)(1) phases out for an
eligible individual with 1 qualifying child, or''.
Subsec. (f). Pub. L. 103-66, Sec. 13131(d)(6), added subsec. (f).
1990 - Subsec. (c)(2)(B), (C). Pub. L. 101-508 amended subpars.
(B) and (C) generally. Prior to amendment, subpars. (B) and (C)
read as follows:
''(B) if the employee is not married, or if no earned income
eligibility certificate is in effect with respect to the spouse of
the employee, shall treat the credit provided by section 32 as if
it were a credit -
''(i) of not more than 14 percent of earned income not in
excess of the amount of earned income taken into account under
section 32(a), which
''(ii) phases out between the amount of earned income at which
the phaseout begins under subsection (b) of section 32 and the
amount of earned income at which the credit under section 32 is
phased out under such subsection, or
''(C) if an earned income eligibility certificate is in effect
with respect to the spouse of the employee, shall treat the credit
provided by section 32 as if it were a credit -
''(i) of not more than 14 percent of earned income not in
excess of 1/2 of the amount of earned income taken into account
under section 32(a), which
''(ii) phases out between amounts of earned income which are
1/2 of the amounts of earned income described in subparagraph
(B)(ii).''
1986 - Subsec. (c)(2)(B). Pub. L. 99-514, Sec. 111(d)(2), added
cls. (i) and (ii) and struck out former cls. (i) and (ii) which
read as follows:
''(i) of not more than 11 percent of the first $5,000 of earned
income, which
''(ii) phases out between $6,500 and $11,000 of earned income,
or''.
Subsec. (c)(2)(C). Pub. L. 99-514, Sec. 111(d)(3), added cls. (i)
and (ii) and struck out former cls. (i) and (ii) which read as
follows:
''(i) of not more than 11 percent of the first $2,500 of earned
income, which
''(ii) phases out between $3,250 and $5,500 of earned income.''
1984 - Subsec. (b)(1). Pub. L. 98-369, Sec. 474(r)(30),
substituted ''section 32'' for ''section 43''.
Subsec. (c)(2)(B). Pub. L. 98-369, Sec. 474(r)(30), substituted
''section 32'' for ''section 43'' in provisions preceding cl. (i).
Subsec. (c)(2)(B)(i). Pub. L. 98-369, Sec. 1042(d)(3),
substituted ''11 percent'' for ''10 percent''.
Subsec. (c)(2)(B)(ii). Pub. L. 98-369, Sec. 1042(d)(3),
substituted ''$6,500 and $11,000'' for ''$6,000 and $10,000''.
Subsec. (c)(2)(C). Pub. L. 98-369, Sec. 474(r)(30), substituted
''section 32'' for ''section 43'' in provisions preceding cl. (i).
Subsec. (c)(2)(C)(i). Pub. L. 98-369, Sec. 1042(d)(4),
substituted ''11 percent'' for ''10 percent''.
Subsec. (c)(2)(C)(ii). Pub. L. 98-369, Sec. 1042(d)(4),
substituted ''$3,250 and $5,500'' for ''$3,000 and $5,000''.
Subsec. (c)(3)(A)(i). Pub. L. 98-369, Sec. 474(r)(30),
substituted ''section 32'' for ''section 43''.
1983 - Subsec. (d)(4). Pub. L. 98-67 repealed amendments made by
Pub. L. 97-248. See 1982 Amendment note below.
1982 - Subsec. (d)(4). Pub. L. 97-248 provided that, applicable
to payments of interest, dividends, and patronage dividends paid or
credited after June 30, 1983, par. (4) is amended by inserting
''subchapter A of'' before ''chapter 24''. Section 102(a), (b) of
Pub. L. 98-67, title I, Aug. 5, 1983, 97 Stat. 369, repealed
subtitle A (Sec. 301-308) of title III of Pub. L. 97-248 as of the
close of June 30, 1983, and provided that the Internal Revenue Code
of 1954 (now 1986) (this title) shall be applied and administered
(subject to certain exceptions) as if such subtitle A (and the
amendments made by such subtitle A) had not been enacted.
EFFECTIVE DATE OF 1994 AMENDMENT
Section 721(d)(2) of Pub. L. 103-465 provided that: ''The
amendments made by subsections (b) and (c) (amending this section
and section 6051 of this title) shall apply to remuneration paid
after December 31, 1994.''
EFFECTIVE DATE OF 1993 AMENDMENT
Amendment by Pub. L. 103-66 applicable to taxable years beginning
after Dec. 31, 1993, see section 13131(e) of Pub. L. 103-66, set
out as a note under section 32 of this title.
EFFECTIVE DATE OF 1990 AMENDMENT
Amendment by Pub. L. 101-508 applicable to taxable years
beginning after Dec. 31, 1990, see section 11111(f) of Pub. L.
101-508, set out as a note under section 32 of this title.
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by Pub. L. 99-514 applicable to taxable years beginning
after Dec. 31, 1986, see section 151(a) of Pub. L. 99-514, set out
as a note under section 1 of this title.
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by section 474(r)(30) of Pub. L. 98-369 applicable to
taxable years beginning after Dec. 31, 1983, and to carrybacks from
such years, see section 475(a) of Pub. L. 98-369, set out as a note
under section 21 of this title.
Amendment by section 1042(d)(3), (4) of Pub. L. 98-369 applicable
to taxable years beginning after Dec. 31, 1984, see section 1042(e)
of Pub. L. 98-369, set out as a note under section 32 of this
title.
EFFECTIVE DATE
Section 105(g)(2) of Pub. L. 95-600, as amended by Pub. L.
96-222, title I, Sec. 101(a)(2)(D), Apr. 1, 1980, 94 Stat. 195,
provided that: ''The amendments made by subsections (b), (c), and
(e) (enacting this section and amending sections 6051 and 6302 of
this title) shall apply to remuneration paid after June 30, 1979.''
STUDY OF ADVANCE PAYMENTS
Section 11113 of title XI of Pub. L. 101-508 provided that:
''(a) In General. - The Comptroller General of the United States
shall, in consultation with the Secretary of the Treasury, conduct
a study of advance payments required by section 3507 of the
Internal Revenue Code of 1986 to determine -
''(1) the effectiveness of the advance payment system
(including an analysis of why so few employees take advantage of
such system), and
''(2) the manner in which such system can be implemented to
alleviate administrative complexity, if any, for small business,
and
''(3) if there are any other problems in the administration of
such system.
''(b) Report. - Not later than 1 year after the date of the
enactment of this title (Nov. 5, 1990), the Comptroller shall
report the results of the study conducted under subsection (a),
together with any recommendations, to the Committee on Finance of
the United States Senate and the Committee on Ways and Means of the
House of Representatives.''
References
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 32, 6012, 6051, 6302 of
this title; title 7 section 2014; title 42 sections 653, 1382a,
1382b.
