Browse our HR content and webinar libraries, read the latest blog articles, or check out our HR Software Calculator.
Get new and unique perspectives on HR tech, best practices, and current events every week.
A new podcast from BambooHR about putting your people first.
Browse our library of ebooks, infographics, how-to guides, and unique research.
Stream HR insights right to your screen. Watch one of our 100+ partner webinars absolutely free.
We wrote the book on everything HR.
From Applicant Tracking System to Work/Life Balance, we can help you become a walking HR encyclopedia.
Want to know how much your organization could save with the right HRIS? Start here.
From hiring and onboarding remotely to supporting employee mental health, find relevant HR resources for helping your business recover from a crisis.
Learn about all of the exciting changes that are happening to our platform.
Learn about the company, find press and media details, or apply to work with us!
Who we are, where we came from, and why we make HR software.
This is where you’ll find the latest news and resources from BambooHR.
Are you awesome? Come work with us!
Join us at all the virtual and non-virtual events we're throwing or attending.
Join one of our partner programs.
Get in touch with BambooHR.
Glossary of Human Resources Management and Employee Benefit Terms
The Advance Earned Income Credit was an early bestowal of the Earned Income Credit to employees who completed form W-5, Earned Income Credit Advance Payment Certificate.
Eligible employees receive their Earned Income Tax Credit (EIC/EITC) from the federal government after they have filed their tax return. Advance Earned Income Credit provided a way for employees to get a portion of that credit in advance through their paycheck. Employers would make these credit payments from federal income, Social Security, and Medicare taxes withheld from an employee’s wages.
Earned Income Credit was established in 1975 as a way to provide financial assistance to low-income working families who had children. As an anti-poverty program that incentivized people to work, EIC was seen as an alternative to government welfare.
Some federal officials thought periodic payments would be better for these individuals, rather than a once-a-year lump sum. So in 1978, an advanced payment option was introduced for families who anticipated qualifying for the tax credit.
However, the Advance EIC policy suffered from poor design. Very few people actually used it as a benefit. A report from 1992 by the General Accounting Office found three principal reasons why so few people used Advance EIC:
Many eligible employees and their employers were not aware of it as an option.
Some employees thought they had to repay advances when they filed tax returns.
Some employees preferred a lump-sum refund payment instead of smaller periodic payments.
The Advance EIC option was repealed in 2010 under the Obama administration. The administration felt the positive effects of the Advance EIC option were fairly insignificant since the benefit was used by less than 3% of eligible taxpayers.
Advance EIC was also repealed because of administrative problems and non-compliance errors. The General Accountability Office found more than 80% of people receiving advance credit were actually non-compliant with at least one of the program’s requirements. For example, about 100,000 recipients from 2002 to 2004 may not have had a valid Social Security number (SSN).
Nothing replaced the Advance EIC option to allow taxpayers to get an advance on their tax returns. However, Earned Income Credit still remains, so taxpayers will still receive money on their taxes if they are part of a working low-income family. This credit will come in a lump sum rather than incremental supplements to their paycheck.