Notice of Federal and California Earned Income Tax Credit
Each year, California employers are required to inform all employees that they may be eligible for the California Earned Income Tax Credit (EITC) and the Federal Earned Income Tax Credit. (Revenue and Taxation Code, sec. 19853)
When and How Notice is Provided
- Employers must notify employees that they may be eligible for the Federal EITC and the California EITC within one week before or after, or at the same time, that the employer provides an annual wage summary, including, but not limited to, a Form W-2 or a Form 1099, to any employee.
- The employer must provide the required EITC notice by handing directly to the employee or mailing to the employee’s last known address.
- The employer cannot satisfy the notification requirement by posting a notice on an employee bulletin board or sending it through office mail. However, these methods of notification are encouraged to help inform all employees of the Federal and the California EITC.
California EITC Notice
The required language of the California EITC Notice to be furnished to employees is prescribed in R&T 19854(a). The California EITC Notice describes the general availability of both the Federal EITC credit and State EITC credit to eligible employees. The California EITC Notice also provides information about claiming the credit of federal and state tax returns. In addition, the California EITC Notice includes instructions on how to obtain notices from the Internal Revenue Service (IRS) and the Franchise Tax Board (FTB), specifically referencing IRS Notice 797, the IRS website and the California Franchise Tax Board (FTB) website.
Federal EITC Notice
California law directs employers to provide employees with information regarding their eligibility to receive the Federal EITC, including the information provided in IRS Notice 797. The California Employee Tax Information/EITC Information Booklet includes the full text of the current Notice 797, which reflects the amount of tax credit an employee may receive based on the number qualifying children the employee has. Notice 797 also explains how to claim the credit, how to obtain tax preparation assistance and free tax filing information. It also informs employees how to obtain other publications on the web or by contacting the IRS by telephone.
IRS Qualifying Child Rules
The California Employee Tax Information/EITC Information Booklet also contains a detailed explanation of the rules that determine whether an employee qualifies for a greater tax benefit based on the number of qualifying children the employee has. The four factors are: (1) relationship, (2) age, (3) residency and (4) joint return. It also describes the “tie-breaker” rules that apply when a child meet the rules to be a qualifying child of more than one person.
Important Message from the IRS
The California Employee Tax Information/EITC Information Booklet also contains an updated version of the IRS’ Important Message from the IRS publication. This publication highlights the current Federal EITC income thresholds and references other refundable tax credits that the employee may be eligible for.