Federal Earned Income Tax Credit Notification
Effective January 1, 2008, all employers are required to notify all of their employees of the federal Earned Income Tax Credit (EITC).
Assembly Bill 650, Chapter 606 (Lieu and Jones) requires any employer who is subject to, and is required to provide unemployment insurance to employees, to notify all employees that they may be eligible for the EITC. Employers shall give notification within one week before or after, or at the same time, they provide employees with an annual wage summary ( IRS Form W-2, 1099).
You must provide notification to your employees by either handing it directly to your employee or mailing it to your employee's last known address. Posting of this information on an employee bulletin board will not satisfy the notification requirement.
The notification shall include 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 you, as long as it contains substantially the same language as the notice below or in this sample notice.
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 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.”
California Earned Income Tax Credit (EITC)
California now offers its own Earned Income Tax Credit (CA EITC) starting with calendar year 2015 tax returns. This credit is offered in addition to the existing federal EITC.
The CA EITC is "refundable," meaning that you will receive a refund if the amount of the credit is greater than the tax you owe. This credit is available to California households with adjusted gross incomes of less than $6,580 if there are no qualifying children, less than $9,880 if there is one qualifying child, or less than $13,870 if there are two or more qualifying children. See additional information under "Qualifications" below.
There are important differences between the California EITC and its federal counterpart. The CA EITC requires earned income reported on a W-2 form, such as wages, salaries, and tips, which must be subject to California withholding. Unlike the federal EITC, income from self-employment cannot be used to qualify for the California credit.