Employers Group Blog Connection

Don’t Forget the EITC Notice Required by AB 650

Posted by Nicole Vierzba on Thu, Jan 26, 2012
As employers prepare to mail out their W-2s to employees on or before January 31, 2012, they should also be wary of California’s requirement that they notify employees of the federal Earned Income Tax Credit (EITC).  The notice must be distributed within a week before or after the date employers distribute the W-2.  Most employers simply include the EITC notice in their W-2 packets.  The notice must be sent to each employee by mail or be personally delivered to each individual; posting on a company bulletin board will not suffice.  The notice may either provide instructions on how employees may obtain IRS-published notices regarding the EITC (currently, IRS Notice 797) or, alternatively, employers may craft language substantially the same as follows:
 
“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.”
 
Employees outside California who are not subject to the California Unemployment Insurance Code (CUIC) need not receive the notice, nor is the notice due any individual in California who is not covered by unemployment insurance and, therefore, not considered an “employee” under the CUIC (i.e., independent contractors, etc.).  There is no penalty for noncompliance as the law is currently written.

 

Topics: hr policy, human resources, compensation, best practices