14 February 2018 California employers must notify employees of their potential eligibility for the state's earned income tax credit Legislation enacted in 2016 modifies the law requiring that California employers notify employees of the earned income tax credit (EITC). Specifically, California employers must notify employees of both the federal and California EITC. Previously, employers were required only to notify employees of the federal EITC. (AB 1847.) The requirement was effective for tax year 2017; however, the California Employment Development Department (EDD) has not updated its website with the new requirements. Accordingly, EDD officials tell us that employers which did not include the additional state ETIC information in their 2017 employee notices may do so now to avoid possible penalties. (Telephone conversation, EDD, 2-11-2018.) Governor Edmund G. Brown Jr's 2015-16 state budget established the California EITC. California's low-income working families are eligible for both state and federal EITC benefits. (CalEITC.) Legislation enacted in late 2016 (AB 1847), and effective for tax year 2017, requires every California employer to notify all of their employees of their potential eligibility for the California EITC, in addition to supplying information on the federal EITC. The law requires employers to supply the notice within one week before or after, or at the same time as, the employer supplies a Form W-2 to an employee (or, according to the law, a Form 1099 to an independent contractor). Employers must provide notification to their employees by either handing it to them directly or by mailing it to their last known address. Posting of this information on an employee bulletin board will not satisfy the notification requirement. The 2017 employee notice should contain language similar to IRS Notice 797 and the 2017 California EITC information available here. California employers have been required since 2008 to provide information on the federal EITC to their employees, and the California Employment Development Department (EDD)'s website advises employers of this requirement. The California Franchise Tax Board (FTB)'s website also provides information. Neither website informs employers of the new requirement to additionally provide information on the California EITC. We spoke to senior representatives of the FTB and EDD, who told us that employers which did not include California EITC information in the 2017 required notice to employees because they were unaware of the new requirement to do so, may still do so now to possibly avoid any potential state agency sanctions. The EDD is not certain when it will update its website to include the added information employers should include in the employee EITC notice. (Telephone conversations, California Franchise Tax Board and Employment Development Department, February 13, 2018.) Employees that have already filed their California state income tax returns (but did not request the California EITC) have the option of filing revised 2015, 2016, and 2017 returns. Individuals making a claim for refund, must file an amended tax return within four years from the original due date of the tax return or within one year from the date of overpayment, whichever period expires later. On February 12, 2018, Governor Brown issued a proclamation declaring February 11-17, 2018 as "California Earned Income Tax Credit Awareness Week." Employees can find out more about the California EITC and see if they are eligible by going to the CalEITC4me website. According to the governor's proclamation: "The Earned Income Tax Credit was put into effect in California in 2016 as a tool to help lift working families and their children out of poverty. Each year, almost 400,000 Californians earn refunds from the program, totaling nearly $200 million. This year, over a million more Californians will qualify for this tax credit because of higher income limits and the expansion of eligibility to the self-employed. However, many Californians who are eligible for this tax credit do not apply. Every year, nearly $2 billion of combined state and federal tax credits is left on the table, unclaimed. This money is allocated for working, qualified individuals and families to put more cash in their pockets to support basic needs such as food, housing, health care, education and transportation." Document ID: 2018-0320 |
