Form W-2s will be arriving in the next couple of weeks and it is important for employers in certain states and locations to be aware of a specific notice requirement regarding the Earned Income Tax Credit (EITC).
What is EITC?
An Earned Income Tax Credit (EITC) is a reduction in the amount of tax an employee owes (or an increase in income tax refunds) and it is available to certain qualified individuals. In some states, employers are required to provide specific notices to inform their employees about the EITC. Here are specific details about each state that carries EITC requirements:
California law requires that employers notify their employees of the federal Earned Income Tax Credit (EITC) and the California Earned Income Tax Credit (Cal EITC) by providing a notice within one week of providing the Form W-2. The law states that the notice must be handed or mailed to the employee — it does not include a provision for delivering it electronically. The notice can either provide the language of the notice, or provide information on how to access this information from the IRS and California Franchise Tax Board.
We would recommend creating a notice using the language listed below and passing it out to employees when you pass out their Form W-2s.
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.
Employers must give or mail a notice to employees, regarding the EITC, within one week before or after the Form W-2 is distributed. The following is the language that must be included in this notice:
IF YOU EARNED LESS THAN $39,617 LAST YEAR AND HAVE AT LEAST ONE CHILD, YOU MAY BE ELIGIBLE TO RECEIVE A TAX CREDIT FROM THE FEDERAL GOVERNMENT. THE TAX CREDIT MAY BE A REFUND FROM THE FEDERAL GOVERNMENT FOR AS MUCH AS $3,400. EVEN IF YOU DO NOT OWE FEDERAL TAXES, YOU MUST FILE A TAX RETURN TO RECEIVE THE EARNED INCOME TAX CREDIT. BE SURE TO FILL OUT THE EARNED INCOME TAX CREDIT FORM IN THE TAX RETURN BOOKLET.
Business establishments in Louisiana with 20 or more employees are required to provide a notice at the time of hiring. Here is a link to the required notice.
The Maryland Comptroller sends a letter to all Maryland employers at the end of each year which outlines the figures for the EITC eligibility. Employers are then required to send this to all eligible employees on or before December 31st. Here is a sample notice.
Employers are required to provide a notice of the New Jersey Earned Income Tax Credit (NJEITC) to potentially eligible employees between January 1st and February 15th of each year. Here is a link to the notice.
Employers in Oregon must provide employees with the ETIC notice at the time that their Form W-2 is given out. A sample notice can be found here.
Employers must provide Philadelphia residents with the ETIC notice at the time that the Form W-2 is given out. A sample notice can be found here.
No later than March 1st of each year, employers must notify their employees of the Federal EITC. The notice can be given in person, electronically, through a flyer, or by mail. Employers may use the Federal IRS Notice 797, or they can create a written statement with the same wording.
Employers are required to hang the EITC notice with all of the other State and Federal Labor Law posters. Employers can find the required poster here.
If you are a StratEx client, and have any questions about these requirements, please reach out to your HR Account Manager or a StratEx Service Team Member.