One of your core duties as an employer is to inform your employees of the specific tax situations that may affect them. One of these situations is a notification regarding the labor tax credit. Believe it or not, the Internal Revenue Service and many states in the United States require employers to send information to certain employees about eligibility for the income tax credit (EITC or EIC). This article will cover the basics of EITC and EIC communications, including advisory 797.
Earned income credit is a refundable tax credit for taxpayers who reach a specific income level to reduce overall liability. Taxpayers who qualify as receivables on the tax return are granted.
Even if you did not deduct your income tax for the year, a taxpayer might be eligible for the EIC.
Employers in some states are required to submit an eligibility notice to receive this tax credit for eligible EIC employees. EITC notification can take the form of Form 797 in some states. Notice 797 is a form that informs qualified taxpayers of their eligibility for a federal EIC loan.
Typically, state employers requesting income credit advice must submit the notification with Form W-2. Employers must request the state-requested EITC notice. The information informs employees if they are eligible.
As an employer, you are accountable for notifying employees of this tax credit. In particular, the IRS requires that employees be informed that they have no federal source deductions.
We recommend that you inform any employee whose salary for the year is less than a certain amount, depending on the marital status of the employee, who may be eligible for IEC. This number changes every year. See IRS 1015 for the current year to see the current value.
Employer's responsibility stops with notification to employees. If the employee wishes to modify the source deduction, you can help by providing a W-4 form. There is no need to assist an employee in the EITC application process.
It is necessary to inform each employee that
However, it is not necessary to inform an employee who has requested an exemption from withholding tax. You can find information on how to request an exemption on the W-4 form of the employee you signed when they were hired.
You can inform your employees in several ways:
The easiest way to meet the requirement is to include an EIC notification on Form W-2, the employee's salary, and income tax return offered in January of each year. Include the notice behind copy B (employee copy of the federal income tax return). By placing the notification on the back of copy B, you also notify the IRS that you meet this condition.
Each employee must receive a copy of the notification in one of the ways mentioned above. It is not possible to post the notice in the employee's notice board, although you can post the notice and ensure that each qualified employee has a copy.
You will comply with these rules if you provide this notice to your employees on W-2 or a W-2 substitute with the W-2 due date of January 31 of the year following the fiscal year. If you are offering the employee a W-2 for 2019, you must notify them by notifying them with the W-2 forms before January 31, 2020.
If an employee does not receive a W-2 form, they must submit it before February 7.
Give your employees an IRS 797 notice (or a copy of this exact form) that explains:
