Employers Are Required To Notify All CA Employees That They May Be Eligible For Federal and CA EITC
Since 2008, California employers have been required to notify their California-based employees that they may be eligible for the federal and the California Earned Income Tax Credit (EITC) by giving them a separate notice.1 Employers must also be prepared to process a Form W-5 for advance payments of EITC upon the employee’s request.
The EITC is a refundable credit meant to alleviate the tax burden on working low- to moderate-income taxpayers and their families. A taxpayer who does not have a qualifying child may claim the credit if she/he resides in the U.S., is over the age of 25 and under 65 before the end of the year, and is not the dependent of another taxpayer. A married taxpayer must file a joint return to claim the credit.
The EITC is computed by applying the credit rate to the taxpayer’s income up to a base amount. The rate and base are determined by the number of qualifying children.
The state of California offers its own EITC, in addition to the federal EITC.
Notice to Employees
To comply with Rev. & Tax. Code sec. 19853, employers should furnish the below written notice by hand or by mail, to the employee’s last known address, within one (1) week of when the employer provides the employee with an annual wage summary, such as a W-2 or 1099 form.
Some W-2 forms have the required information about EITC on the back of the employee’s copy. Employers who furnish W-2 forms with the required information, including the California notice, need not provide further notice.
However, employers who furnish substitute W-2 forms, or other annual income statements, must provide notice. Such employers may find it wise to enclose the notice with the W-2 or 1099 forms, or other annual income statements.
Employers who only post the notice on a bulletin board will not be in compliance with the statute.
The written notice must state:
BASED ON YOUR ANNUAL EARNINGS, YOU MAY BE ELIGIBLE TO RECEIVE THE EARNED INCOME TAX CREDIT FROM THE FEDERAL GOVERNMENT (FEDERAL EITC). THE FEDERAL EITC IS A REFUNDABLE FEDERAL INCOME TAX CREDIT FOR LOW-INCOME WORKING INDIVIDUALS AND FAMILIES. THE FEDERAL EITC HAS NO EFFECT ON CERTAIN WELFARE BENEFITS. IN MOST CASES, FEDERAL EITC PAYMENTS WILL NOT BE USED TO DETERMINE ELIGIBILITY FOR MEDICAID, SUPPLEMENTAL SECURITY INCOME, FOOD STAMPS, LOW-INCOME HOUSING, OR MOST TEMPORARY ASSISTANCE FOR NEEDY FAMILIES PAYMENTS. EVEN IF YOU DO NOT OWE FEDERAL TAXES, YOU MUST FILE A FEDERAL TAX RETURN TO RECEIVE THE FEDERAL EITC. BE SURE TO FILL OUT THE FEDERAL EITC FORM IN THE FEDERAL INCOME TAX RETURN BOOKLET. FOR INFORMATION REGARDING YOUR ELIGIBILITY TO RECEIVE THE FEDERAL EITC, INCLUDING INFORMATION ON HOW TO OBTAIN THE IRS NOTICE 797 OR ANY OTHER NECESSARY FORMS AND INSTRUCTIONS, CONTACT THE INTERNAL REVENUE SERVICE BY CALLING 1-800-829-3676 OR THROUGH ITS WEB SITE AT WWW.IRS.GOV.
YOU ALSO MAY BE ELIGIBLE TO RECEIVE THE CALIFORNIA EARNED INCOME TAX CREDIT (CALIFORNIA EITC) STARTING WITH THE CALENDAR YEAR 2015 TAX YEAR. THE CALIFORNIA EITC IS A REFUNDABLE STATE INCOME TAX CREDIT FOR LOW-INCOME WORKING INDIVIDUALS AND FAMILIES. THE CALIFORNIA EITC IS TREATED IN THE SAME MANNER AS THE FEDERAL EITC AND GENERALLY WILL NOT BE USED TO DETERMINE ELIGIBILITY FOR WELFARE BENEFITS UNDER CALIFORNIA LAW. TO CLAIM THE CALIFORNIA EITC, EVEN IF YOU DO NOT OWE CALIFORNIA TAXES, YOU MUST FILE A CALIFORNIA INCOME TAX RETURN AND COMPLETE AND ATTACH THE CALIFORNIA EITC FORM (FTB 3514). FOR INFORMATION ON THE AVAILABILITY OF THE CREDIT, ELIGIBILITY REQUIREMENTS, AND HOW TO OBTAIN THE NECESSARY CALIFORNIA FORMS AND GET HELP FILING, CONTACT THE FRANCHISE TAX BOARD AT 1-800-852-5711 OR THROUGH ITS WEB SITE AT WWW.FTB.CA.GOV.2
1 Rev. & Tax. Code sec. 19853
2 Rev. & Tax. Code sec. 19854