The Advance Earned Income Credit (AEIC) was a tax benefit that allowed eligible workers to get part of their Earned Income Tax Credit (EITC) throughout the year, instead of waiting until tax season. This meant qualifying employees could get extra money in their paychecks regularly, helping them with ongoing expenses.
To take advantage of it, workers filled out Form W-5 and gave it to their employer. The employer then included a portion of the credit in their pay. Simple.
When was the advance earned income credit repealed?
The AEIC was officially repealed in 2011. It was removed as part of the Education Jobs and Medicaid Assistance Act of 2010, signed into law on August 10, 2010. After that, workers couldn’t get the advance payments through their paychecks, but they could still claim the full Earned Income Tax Credit when filing their taxes.
The repeal didn’t get rid of the EITC itself—it just meant workers could no longer receive part of it in advance. They’d get the full credit back as a tax refund instead.
Why was the advance earned income credit eliminated?
There were a few reasons behind the decision to eliminate the AEIC. One of the big issues was that the program wasn’t widely used. Many eligible workers didn’t know about it or found the process too complicated to apply through their employer.
Another problem was that it led to surprises during tax time. Since the AEIC was paid in advance, some workers ended up owing money at the end of the year if their income changed or if they had received too much of the credit. These unexpected tax bills were tough for low-income families who weren’t prepared.
There was also an administrative burden on employers. They had to track and distribute these payments, which made payroll more complicated and prone to mistakes. Many businesses found this process to be a hassle.
Given these challenges, lawmakers decided it was easier and more effective to give the credit as a lump sum when workers filed their taxes. It wasn’t ideal to make families wait longer for relief, but it avoided confusion, overpayments, and added complexity for employers. The goal of helping low-income workers stayed the same, but the method of delivery was changed to make things simpler.