STATE OF CONNECTICUT
WILLIAM E. CURRY JR. COMPTROLLER	OFFICE OF THE STATE COMPTROLLER 55 ELM STREET HARTFORD, CONNECTICUT 06106-1775	EDWARD J. FORAND JR. DEPUTY COMPTROLLER

MEMORANDUM NO. 94-15

June 6, 1994

TO THE HEADS OF ALL STATE AGENCIES

Earned Income Credit (EIC) is a Federal tax program that allows certain individuals to receive a withholding tax credit. Eligible employees may elect to receive advanced payments of EIC in their paychecks by completing Form W-5. Due to the complexity of the rules for qualifying for this program, agency personnel should not be advising employees on whether or not they qualify. Employees should be referred to their accountant or the IRS. Agencies or employees who would like additional information can request publication #596 from the IRS.

Upon entering the appropriate transaction into the payroll system, the EIC amount is calculated on all earnings payments (including supplemental and bonus payments) at the time Federal withholding taxes are calculated (after all other earnings and excludable deductions have been processed). The EIC payment is added directly to the net pay, it is not available for withholding of any deductions (mandatory or optional). It is included in other earnings on the payroll register and will be reported separately on the employees' W-2 form.

Advance EIC payments are not to be requested in the net amount of any petty cash checks requested. The employee will receive the advanced credit on the petty cash recovery cycle.

Payroll Procedures

Upon receipt of Form W-5, initiate advanced EIC payment by creating an RK transaction using D/OE 3B and the following examples:

WILLIAM E. CURRY JR.
STATE COMPTROLLER

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