Effective January 1, 2008, California Employers Are Required To Provide Notice Of The Income Tax Credit Notification

Effective January 1, 2008, Assembly Bill 650 requires California employers to provide written notice to their employees of their possible right to an Earned Income Tax Credit (EITC).  This requirement applies to all employers who are required to provide unemployment insurance to employees under the Unemployment Insurance Code.

Compliance

To comply with the statute, employers must hand-deliver or mail written notice to covered employees.  The state notice, unlike the federal notice, is not limited only to those who could potentially qualify for the EITC, but instead must be sent to all California employees covered by unemployment insurance.  Employers must give notice to all employees that they may be eligible for the EITC within one week before, after, or at the same time the employer provides an annual wage summary, including but not limited to a Form W-2 or Form 1099, to any employee.  Notice by posting or notice by distribution through office mail is not allowed as the primary method of distribution. 

Upon the request of an employee, employers are also required to process, in accordance with federal law, Form W-5 for advance payments of the EITC. 

Required Form of The Notice

While employers can create their own notice, that notice must contain substantially the same language as the statutory language.  Employers are therefore advised to use the language set forth in the statute, which reads as follows:

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 FORM W-5, OR ANY OTHER NECESSARY FORMS AND INSTRUCTIONS, CONTACT THE INTERNAL REVENUE SERVICE AT 1-800-829-3676 OR THROUGH ITS WEBSITE AT WWW.IRS.GOV.

If you have any questions about this new law, please contact any of our attorneys based in our San Francisco or Los Angeles offices.