In fact, workers who use the advance payment option must file a Federal tax return and Schedule EIC at the end of the year. Advance payments do not cost employers any money. Under federal law, employers must give advance payments to workers who ask. Getting advance payments is easy. To keep receiving advance payments without interruption, the worker must file a new W-5 at the beginning of each year.
Workers can begin advance payments any time during the year.
Advance payments are set up based on the EIC benefit expected at the end of the year. Anyone already getting advance payments and whose situation changes in any of the ways listed above can notify their employer to stop advance payments anytime. Employers can refer to IRS Circular E, which they should have received from the IRS, for information about advance payments. Under such a system, the same tax rate would be applied to taxable income at all income levels. What all these plans have in common is greatly reduced taxes for those with very high incomes, compared to what they pay under the current system.