Did the federal repeal of paycheck advances under the Earned Income Tax Credit change New Jersey Gross Income Tax reporting?

Plain-English summary

Ending the federal Advance Earned Income Tax Credit program did not change New Jersey Gross Income Tax reporting.

The former federal program let qualifying taxpayers receive part of their expected EITC as an additional amount in regular paychecks. The employer reported the advance on Form W-2, and 2010 was the program's final year.

New Jersey did not provide an advance EITC payment. Under N.J.S.A. 54A:4-7, an eligible resident instead claimed a New Jersey credit equal to a percentage of the allowed federal EITC.

Because New Jersey had no advance-payment mechanism to repeal, the federal change had no effect on New Jersey reporting.

What this means for you

Taxpayers

The TAM addressed only the discontinued paycheck-advance program, not eligibility for the regular New Jersey EITC.

Payroll and tax preparers

No New Jersey reporting adjustment arose merely because federal advances stopped after 2010.

Common questions

Q: Could taxpayers receive New Jersey EITC advances in their paychecks?
A: No.

Q: Did New Jersey still have an EITC?
A: Yes. The TAM describes a credit based on a percentage of the allowed federal EITC.

Q: Did ending federal advances change New Jersey reporting?
A: No.

Citations and references

• N.J.S.A. 54A:4-7 — New Jersey Earned Income Tax Credit
• I.R.C. § 32 — federal Earned Income Tax Credit

Source

• Landing page: https://www.nj.gov/treasury/taxation/tam-pubs.shtml
• Original PDF: https://www.nj.gov/treasury/taxation/pdf/pubs/tams/tam3.pdf

Original ruling text

Gross Income Tax Reporting For Federal Repeal-Advance Earned Tax Income
Credit Program
TAM 2010-3 – Issued November 1, 2010
Tax: Gross Income Tax
For Federal Income Tax purposes, the Advance Earned Tax Income Credit program was
eliminated as part of HR 1586 and 2010 was the last year for the Advance Earned Tax Income
Credit program. As of January 1, 2011, taxpayers can no longer receive advances on their Earned
Income Tax Credit.
The Advance Earned Tax Income Credit Program, first enacted in 1978, enabled qualifying
taxpayers to receive a portion of their expected Earned Income Tax Credit in advance as an
additional amount in their normal paycheck. The employer provided the amount of the Advance
EITC received on Form W-2 and this amount had to be reported on the recipient’s tax return.
New Jersey Gross Income Tax law in accordance with N.J.S.A. 54A:4-7 does not provide for an
advance payment of the Earned Income Tax Credit. Instead, a New Jersey resident who is eligible
for a Federal Earned Tax Income Credit under IRC sec. 32 is eligible for a New Jersey Earned Tax
Income Credit equal to a percentage of the Federal Earned Tax Income Credit allowed.
Therefore, the elimination of the Federal Advance Earned Tax Income Credit program had no
effect for New Jersey Gross Income reporting purposes.

Note: A Technical Advisory Memorandum (“TAM”) is an informational statement of the law,
regulations, or Division policies. It is accurate on the date issued. Subsequent changes in the law
or regulations, judicial decisions or changes in Division policies could affect the validity of the
information presented in a TAM.

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