FAQs - Earned Income Tax Credit Notification
- Requirements for Notifying Employees
- Penalties for Noncompliance
- Applicable Years for Notification
- Notification of Out–of–State Employees
Requirements for Notifying Employees
Do I send notification to any employee that I've paid unemployment tax for, or just any active employees?
Information about Federal Earned Income Tax Credit (EITC) should be given to all employees, as defined in the FAQ "Who is an Employee", who will be receiving a Form W-2 or Form 1099.
Do I have to send notification to all employees even if they make more than the threshold amount to qualify for EITC?
The notification should be sent to all employees regardless of their earnings.
How do I provide my employees notification of the EITC and what should I provide them?
The law states: The employer shall provide the notification required by handing directly to the employee or mailing to the employee’s last known address either of the following:
- Instructions on how to obtain any notices available from the Internal Revenue Service for this purpose, including, but not limited to, the IRS Notice 797 or any successor notice or form; or,
- Any notice created by the employer, as long as it contains substantially the same language as the notice described below or in this sample notice:
“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 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.”
Employers may provide the EITC notification with or at the same time as the Form W-2 or Form 1099 is given to employees.
Will posting the notice in the employee lounge meet the notification requirement?
No, notification must be in person or by mailing it to the employee’s last known address.
Can the employee be notified by e-mail?
The law states: The employer shall provide the notification required by handing directly to the employee or mailing to the employee’s last known address.
Penalties for Noncompliance
If I don’t notify my employees in time, will I be penalized?
There is no penalty stipulated in the law as currently written.
Applicable Years for Notification
Is this for my 2007 employees or for my 2008 employees?
Employers are to notify their employees at the same time they issue 2007 Form W-2 or Form 1099. This notification is to be repeated each year at the same time.
Notification of Out-of-State Employees
Would a California employer with employees being reported to another state for unemployment insurance purposes, have to notify those employees as well as any California subject employees?
No. The California employer with employees being reported to another state for unemployment insurance (UI) would not have to notify those employees, because the employer is not subject to the California Unemployment Insurance Code (CUIC) and is not required to provide UI to his or her employees. The employees are not covered by unemployment insurance pursuant to the CUIC.
Regarding the requirement to notify all employees that they may be eligible for the federal EITC, do we notify ALL employees in our company or just all of our CA employees?
The employer would only notify those employees that are covered by unemployment insurance by his or her employer, pursuant to the CUIC.
Who is an "Employer"?
Per Revenue and Taxation Code 19852, an "Employer" means any California employer who is subject to, and is required to provide, unemployment insurance to his or her employees, under the Unemployment Insurance Code.
Who is an "Employee"?
Per Revenue and Taxation Code 19852, an "Employee" means any person who is covered by unemployment insurance by his or her employer, pursuant to the Unemployment Insurance Code.
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