What is the purpose of IRS form W-5?

The purpose of IRS form W-5 is to allow eligible individuals to apply for the earned income credit (EIC) in advance. This form enables workers who have qualifying children to receive part of their anticipated EIC throughout the year instead of waiting until they file their tax returns. This can help provide important financial support to low- to moderate-income families, allowing them to enhance their cash flow as they earn income.

By receiving the earned income credit in advance, individuals can benefit from a reduction in their overall tax burden and potentially receive higher paychecks throughout the year, alleviating financial pressures. The EIC is specifically aimed at helping working families, thereby encouraging employment and providing tax benefits to those who qualify based on their income levels and family size.