Tax time is here. As Bay Area employers prepare to distribute W-2 and 1099 forms to employees, there is a new California tax law they should know about: Effective Jan. 1, California employers are required to provide all employees with written notice of their possible eligibility to claim the federal Earned Income Tax Credit.
To comply with the law, employers must hand-deliver or mail a written notice to all employees within one week of providing annual wage summaries. Posting this information on an employee bulletin board will not satisfy the notification requirement.
The Earned Income Tax Credit is the federal government’s largest benefits program for working families. It was created in 1975 in part to offset the burden of Social Security taxes on low-wage employees and to provide an incentive to work.
Although the EITC is available only to low-income workers, the new law requires all employees (defined as any employee covered by unemployment insurance under the California Unemployment Insurance Code) receive the notice.
Sponsors of the measure, AB 650, created the law because millions of federal EITC dollars go unclaimed every year by California’s hardworking, low-wage families. More information is available on the California Employment Development Department Web site at www.edd.ca.gov.
In tandem with notifying employees about the EITC, employers are encouraged to connect workers with free tax preparation, which will be provided at more than 150 Bay Area locations by the Earn It! Keep It! Save It! coalition, lead by United Way. The coalition provides free tax preparation and help claiming the EITC to households that earned less than $42,000 last year.
Last year, Earn It! Keep It! Save It! Bay Area processed $23.9 million in refunds for 22,962 hardworking Bay Area families. Free tax sites are open days, evenings and Saturdays to meet the needs of employees, regardless of their work schedules. Assistance is provided by IRS-trained volunteers and professional experts from such tax advisory firms as KPMG and Deloitte, who volunteer their time. Assistance is available in English, Spanish, Chinese, Farsi, Russian and Vietnamese.
Workers seeking information about free tax sites, eligibility, and what documents to bring, can call 211 or (800) 358-8832, or visit www.earnitkeepitsaveit.org.
Anne Wilson is the CEO of United Way of the Bay Area, which leads the Earn It! Keep It! Save It! Bay Area coalition.