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What is IRS Form W-5?

What was the W-5 form used for?

What is IRS Form W-5

A W-5 form is an obsolete form previously used by eligible employees to get part of their Earned Income Credit (EIC) in advance with their pay.

The W-5 form has not been used by any taxpayer since 2010. 

What is IRS Form W-5?

The IRS form was used by qualified employees to earn an EIC advance. When applicable, an employee submits a W-5 form to the Internal Revenue Service (IRS) to receive an advance of the EIC before filing 1040 in the specific tax year.

The EIC is a tax credit for qualified workers in the following instances;

  • Available in basic credit
  • Extra credit for a child born in 1993 (a qualifying child with a valid social security number)
  • Health insurance 

Individuals can only have one Form W-5 in effect with a current employer. If an individual is married, the employee and the spouse can both file a Form W-5, totaling two filers. 

When submitting the earned income credit advance payment certificate, the following information had to be stipulated;

  • Marital status
  • The expectation of the filing status, such as single, married, filing a joint return, head of household, or qualifying widow with a dependent child.
  • Details on the qualified child

There were a few limitations to filing a Form W-5. The following examples are a few of many eligibility requirements; 

  • Investment income (including ordinary dividends and capital gain distributions) can’t exceed $2,900 (in 2010). 
  • An individual who lived as a nonresident alien for parts of the year was ineligible unless married to a U.S. citizen. 
  • Earned and adjusted gross income is estimated to be less than $35,535 (in 2010), not including amounts received as pension or annuity from a nonqualified deferred compensation plan.

Today, employees can only receive the EIC after filing their tax return, and accessibility to EIC is not available in advance.

What was the W-5 form used for?

Working individuals with low to moderate incomes requested an advance on their EIC to reduce tax liability. In certain situations, qualified individuals may have received a refund even though they didn’t owe any income tax.

The Form W-5 differs from Form W-2, Form W-3, and Form W-4 in the following ways;

  • Form W-2 — employers send employees a Form W-2 to tally the total earnings over the annual pay period and determine how much income tax withholding has already been paid on the earnings.
  • Form W-3 — also known as the Transmittal of Wage and Tax Statements, it confirms the total of all parts of Form W-3 sent to the Social Security Administration (SSA) and IRS.
  • Form W-4 — employees provide information to employers about how much to withhold from paychecks, ensuring that the IRS collects the federal income tax return more efficiently.
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