After the long discussion (and debate) about the passage of the tax reform bill, it may surprise some that this key form of tax relief for working people will stay in place. If you haven’t promoted the Earned Income Tax Credit to your employees before, this year may be the optimal time to spread the word.
What is the EITC and why does it matter?
The EITC has been around since the 1970s. It gives working families who make up to $53,000 a year (depending on the number of dependents in their households) a penalty-free income boost in the form of a tax refund. In 2017, 25.8 million people benefited from the EITC, and the average federal tax refund is $2,440.
This tax credit has been politically popular because it’s seen as an antipoverty program that provides a hand up for working families. It’s designed to give people an incentive to earn an income, and studies show that it has a positive effect on working people and by extension, the business community. What happens is workers spend more time in the labor force, gaining experience and skills, and in the long run, businesses benefit with a larger, better skilled labor pool.
Are your workers claiming this credit?
Despite these benefits, one out of five adults who file tax returns is not taking advantage of the credit. That is why the IRS does a media blitz every year for EITC Awareness Day, which is on Friday, Jan. 26, this year. According to the IRS, taxpayers who miss out on the tax credit tend to fit the following profiles:
Promote the EITC at your company
The IRS has some requirements for employers to notify workers of the EITC. But if any of the above describes the people on your payroll, it's really pretty simple and inexpensive to increase awareness at your site so employees who qualify can take advantage of this income boost.
Printed materials: The IRS site has handy templates for posters and envelope stuffers, so you can make people aware of the EITC in the break room and when it’s time to distribute paychecks and W-2 forms.
Electronic promotion: How else do you communicate with employees? Use those tools, including the intranet, company newsletter or social media to remind your employees the EITC is there for them.
Community involvement: In your county or community, there may be free tax preparation assistance available for those who are older, lower income, non-English speakers or for those who have disabilities. Oftentimes, you’ll find these through the IRS’s Volunteer Income Tax Assistance (VITA) or the AARP. Check your library, your local AARP chapter or call Minnesota Department of Revenue at 1-800-657-3989 to find what’s in your area, and be sure to get a schedule and promote it to your employees.