IRS Notice 797 – IRS Forms, Instructions, Pubs 2026 – If you’ve received IRS Notice 797 from your employer, it could mean good news for your taxes. This notice alerts you to a potential federal tax refund through the Earned Income Credit (EIC), a valuable benefit for low- to moderate-income workers. Even if no taxes were withheld from your paycheck or you owe nothing, you might still qualify for a refund. In this comprehensive guide, we’ll break down what IRS Notice 797 means, EIC eligibility, how to claim it, and key details for the 2025 tax year to help you maximize your refund.
What is IRS Notice 797?
IRS Notice 797, titled “Possible Federal Tax Refund Due to the Earned Income Credit (EIC),” is an informational document designed to inform workers about the EIC. It’s typically sent by employers to employees who may not have had federal income tax withheld from their wages, highlighting that they could still be eligible for a refundable tax credit. The notice emphasizes that the EIC is a refundable credit, meaning it can reduce your tax liability to zero and provide a refund for any excess amount.
Employers are required under federal law to provide this notice (or an equivalent statement) to certain employees, such as those without income tax withholding, by specific deadlines like February 5 or when issuing Form W-2. Some states, including California, Illinois, Texas, and Virginia, have additional requirements for employers to distribute EIC notices. Receiving this notice doesn’t mean you automatically qualify—it’s a prompt to check your eligibility and file a tax return if applicable.
What is the Earned Income Tax Credit (EIC)?
The Earned Income Tax Credit, also known as EITC or EIC, is a refundable federal tax credit aimed at supporting working individuals and families with low to moderate incomes. Unlike deductions that reduce taxable income, the EIC directly lowers your tax bill and can result in a cash refund if the credit exceeds what you owe. It’s particularly beneficial for those with children, but childless workers can also qualify.
The credit is based on your earned income (like wages or self-employment earnings), filing status, and number of qualifying children. Importantly, claiming the EIC won’t affect eligibility for most welfare benefits, and refunds from the EIC aren’t counted as income for those programs. For tax year 2025 (filed in 2026), the EIC continues to provide significant relief amid rising living costs.
Who Receives IRS Notice 797?
You might receive IRS Notice 797 if:
- Your employer identifies you as potentially eligible based on your W-4 form or lack of tax withholding.
- You earned income but had no federal taxes withheld.
- You’re in a low-income bracket where the EIC could apply.
This notice is especially common for part-time workers, gig economy participants, or those with variable incomes. However, employers aren’t required to send it to employees who claimed full exemption from withholding on Form W-4. If you get this notice, it’s a signal to review your tax situation—even if you think you don’t need to file a return, doing so could unlock a refund.
Eligibility Requirements for the EIC in 2025
To qualify for the EIC in tax year 2025, you must meet general rules and specific criteria based on whether you have qualifying children. Here’s a breakdown:
General Rules for Everyone
- Valid Social Security Number (SSN): You (and your spouse if filing jointly) must have a valid SSN issued by the due date of your return, including extensions.
- U.S. Citizenship or Residency: You must be a U.S. citizen or resident alien for the entire year.
- Filing Status: You can’t file as married filing separately if you have a qualifying child (special rules apply for separated spouses).
- No Foreign Earned Income: You can’t file Form 2555.
- Investment Income Limit: No more than $11,950 in investment income (like interest or dividends).
- Earned Income: You must have earned income from work; unemployment benefits don’t count.
- Age and Dependency: If no qualifying children, you must be aged 25–64, not a dependent, and not a qualifying child of another taxpayer. You must also live in the U.S. for more than half the year.
Rules for Qualifying Children
A qualifying child must meet these tests:
- Relationship: Son, daughter, stepchild, foster child, sibling, or descendant (e.g., grandchild).
- Age: Under 19 (or 24 if a full-time student) at year-end, or any age if permanently disabled.
- Residency: Lived with you in the U.S. for more than half the year.
- Joint Return: The child didn’t file a joint return (except to claim a refund).
- The child can’t be claimed by more than one person for the EIC, and they must have a valid SSN.
Your adjusted gross income (AGI) and earned income must fall below the following limits for 2025:
| Number of Qualifying Children | Single, Head of Household, or Qualifying Surviving Spouse | Married Filing Jointly |
|---|---|---|
| 0 | $19,104 | $26,214 |
| 1 | $50,434 | $57,554 |
| 2 | $57,310 | $64,430 |
| 3 or more | $61,555 | $68,675 |
If your income exceeds these thresholds, you won’t qualify. Use the IRS EITC Assistant tool on IRS.gov to confirm eligibility.
Maximum EIC Amounts for Tax Year 2025
The credit amount varies by family size and income. For 2025, the maximum credits are:
| Number of Qualifying Children | Maximum Credit Amount |
|---|---|
| 0 | $649 |
| 1 | $4,328 |
| 2 | $7,152 |
| 3 or more | $8,046 |
These amounts are refundable, so you could receive the full credit as a refund even if you owe no taxes. The actual amount you get decreases as your income approaches the phase-out limits.
How to Claim the EIC?
Claiming the EIC is straightforward:
- File a Tax Return: Use Form 1040 or 1040-SR. If you have qualifying children, attach Schedule EIC.
- Provide Required Information: Include SSNs for yourself, spouse, and children.
- Calculate the Credit: Let the IRS figure it for you by writing “EIC” on the designated line, or compute it yourself using worksheets in Pub. 596 or tax software.
- Submit Documentation: If audited, be prepared with proof of eligibility (e.g., birth certificates, school records).
Refunds for EIC claims are typically delayed until mid-February by law. Avoid common errors like incorrect SSNs or misreporting income to prevent delays.
Free Tax Preparation Resources
Many qualify for free help:
- IRS Free File: Online filing for those earning under a certain threshold (visit IRS.gov/FreeFile).
- VITA Program: Volunteer Income Tax Assistance for incomes under $69,000 or those 60+ (find locations at IRS.gov/VITA or call 800-906-9887).
For more details, refer to IRS Publication 596 or visit IRS.gov/EITC.
Final Thoughts on IRS Notice 797 and EIC Refunds
IRS Notice 797 serves as a helpful reminder that you might be leaving money on the table if you don’t claim the EIC. With potential refunds up to $8,046 for families in 2025, it’s worth checking your eligibility today. Consult official IRS resources or a tax professional to ensure you qualify and file accurately. By understanding this notice and the EIC, you can boost your financial well-being through well-deserved tax relief.