Employers Must Notify All California Workers if Income Tax Credit

Congress created the Federal Earned Income Tax Credit (EITC) in 1975 to incentivize low-income workers to seek employment rather than welfare. In 2015, California authorized the “Cal EITC” for the same purposes.

The federal and California EITC programs each reduce the amount of tax that the qualified low-income worker may owe. Each may even entitle such worker to a tax refund.

Effective January 1, 2017, Revenue and Taxation Code section 19854(a) requires California employers to notify all employees in writing they may be eligible for these state and federal tax benefits. This code section contains the required notice language.

Affected businesses must personally deliver or mail this notice to workers within one week before or after, or at the same time as, delivery of the employees’ annual wage summary, e.g., a form W-2.

To document compliance, employers should accurately record when and how they delivered the notification form to each employee.

For further information, please contact Tim Bowles, Cindy Bamforth or Helena Kobrin.

Cindy Bamforth

January 27, 2017