Fresno, Calif., (January 8, 2018) – Employers in California must notify employees every year about the Earned Income Tax Credit. Further, an employer must process, upon an employee’s request and as per federal law, Internal Revenue Service Form W-5 for advance payments of the EITC.
The EITC Information Act, codified in Revenue and Taxation Code sections 19850 to 19854, covers every employer required to provide unemployment insurance (UI) to its employees. A covered employer must give the notice to all of its employees who are covered by UI; even employees whose earnings are far above the EITC eligibility limit must get the notice. An employer must notify an employee that the employee may be eligible for the EITC within one week before or after, or at the same time, that the employer gives the employee an annual wage summary, such as an IRS Form W-2 or Form 1099.
The employer must either hand the notice to the employee or mail it to the employee’s last-known address. Posting a notice on an employee bulletin board or sending it through office mail does not suffice.
The employer may choose between two notices. The first is a rather lengthy notice and is specified in the statute:
Based on your annual earnings, you may be eligible to receive the earned income tax credit from the federal government. The earned income tax credit is a refundable federal income tax credit for low-income working individuals and families. The earned income tax credit has no effect on certain welfare benefits. In most cases, earned income tax credit 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 tax return to receive the earned income tax credit. Be sure to fill out the earned income tax credit form in the federal income tax return booklet. For information regarding your eligibility to receive the earned income tax credit, including information on how to obtain the IRS Notice 797 or Form W-5, or any other necessary forms and instructions, contact the Internal Revenue Service at 1-800-829-3676 or through its Web site at www.irs.gov.
Unfortunately, that notice might confuse and/or make many employees who do not qualify for the EITC question their employer’s competency because it begins:
Based on your annual earnings, you may be eligible to receive the earned income tax credit.
This sentence makes it sound as though the employer evaluated the employee’s earnings and determined there is a reasonable prospect that the employee qualifies for the EITC, when in fact no evaluation was made and the employee might be nowhere close to being eligible for the EITC
Given that undesirable outcome and because of its length, an employer might prefer not to give that notice but to give an alternative notice, such as:
You might be eligible for the earned income tax credit, a refundable federal income tax credit for low-income working individuals and families. For information on your eligibility to receive the earned income tax credit, including information on how to obtain Internal Revenue Service Notice 797, IRS Form W-5, or any other pertinent form or instructions, contact the IRS by calling 1-800-829-3676 or through its Web site at www.irs.gov.
Usted puede ser elegible para el crédito de impuestos de ingresos ganados, un crédito de impuestos de ingresos federales reembol-sables para trabaja-dores y familias de bajos ingresos. Para información sobre su elegibilidad para recibir el crédito de impuestos de ganancias ganadas, incluyendo información sobre cómo obtener el Aviso 797, Formulario W-5, del Servicio de Impuestos Interno (IRS por sus siglas en inglés), o cualquier otro formulario pertinente o instrucciones, comuníquese con el IRS, llamando al 1-800-829-3676 o a través de su sitio de la Web al www.irs.gov.
You can find a link to frequently asked questions about the EITC at fels.net/find.
Source: Farm Employers Labor Service, Monthly Newsletter, Vol. 47, No. 11/12, November/December 2017