Reminder: Employers Must Provide Notice of Earned Income Tax Credit
Posted by Connor J. Moyle
As employers prepare to distribute W-2 and 1099 forms to their workers, they should keep the requirements imposed by Assembly Bill 650 in mind. This bill, which went into effect on January 1, 2008, requires California employers to provide notice to all employees of their potential right to an Earned Income Tax Credit (“EITC”) on their federal tax returns. The notice must be hand-delivered or mailed within one week before or after, or at the same time as, the employees’ annual wage summaries are provided, and should include the following language:
NOTICE TO EMPLOYEES
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.
This notice must be provided to all employees (meaning any person who is covered by his employer's unemployment insurance pursuant to the Unemployment Insurance Code) regardless of whether they actually qualify for the EITC. Employers should also note that they may not satisfy the requirements of Assembly Bill 650 by posting a notice on an employee bulletin board or by delivering the notices through interoffice mail. The bill also requires employers, upon request by the employee, to process an employee’s IRS Form W-5 for advance EITC payments.
Please contact us directly if you have any questions regarding steps you must take to comply with Assembly Bill 650.