An employee who is eligible for the Earned Income Credit (EIC) and who has a qualifying child may be entitled to receive EIC payments with his or her pay during the year.  You are required to make advance Earned Income Credit (EIC) payments to your household employee if he or she is eligible and provides you a properly completed Form W-5 .  It is your household employee's responsibility to give you this form. 

               

You may be responsible for giving your household employee notice about the EIC unless you give him or her a copy of Form W-2 by January 31 of next year.  This form has an EIC notice on the back.  You do not have to give your household employee any other notice.  Otherwise, if you agree to withhold your household employee's federal income tax and you determine, using NannyPay, that no income tax need be withheld, then you must give your household employee a notice about the EIC .  In any event, the  IRS encourages all employers to provide an EIC notice to employees whose wages are less than the EIC eligible maximum amount. 

If you must make advance EIC payments to your household employee, NannyPay software will automatically calculate them and add your household employee's advance EIC payment to his or her net pay. NannyPay also separately tracks in its quarterly reports the amount of advance EIC payments you make throughout the year to assist you in completing your year end tax return.  Any EIC payments made to your household employee during the year will reduce the amount of Social Security and Medicare taxes and withheld federal income tax you need to pay at the end of the year to the IRS as part of your own income tax return.

For more information about the EIC, read IRS Publication 15, also known as Circular E (Employer's Tax Guide), a copy of which is included with this program.