Don’t Overlook This Year-End Notice Requirement

Numerous states and at least one city require employers to provide employees with notices about the state and/or federal Earned Income Tax Credit (EITC) and certain other tax credits. The EITC is a refundable income tax credit for low to moderate income workers. In many cases, the notice is required annually. Below, we summarize these state and local requirements.

In 2023, California amended and expanded its notice requirements. Beginning with notices furnished on or after January 1, 2024, employers must notify all employees that they may be eligible for: 

• Voluntary Income Tax Assistance (VITA) Program;
• CalFile (a free online program for taxpayers to complete and e-file their state personal income tax returns); and
• State and federal antipoverty tax credits, including federal and California EITC.

The first notice is due within one week before or after, or at the same time, that the employer provides an annual wage summary to any employee.

Employers must provide the first notice by handing it directly to the employee or mailing it to the employee’s last known address. However, the employer may provide the first notice via email to an email account of the employee's choosing in PDF, JPEG, or other digital image file type format, only if an employee affirmatively, and in writing or by electronic acknowledgment, opts into receipt of electronic statements or materials.

Employers must also send a second notice to all employees during the month of March of the same year. This second notice may be sent electronically.

Notice requirements

Both of the notices must state substantially the following:

Based on your annual earning, you may be eligible for the following assistance:

Voluntary Income Tax Assistance (VITA) Program – VITA is a free basic income tax return preparation program, for federal and state personal income tax returns, managed by the Internal Revenue Service and operated by Internal Revenue Service partners and trained volunteers.

Federal Earned Income Tax Credit (federal EITC) – The federal EITC is a refundable credit for low-income working individuals and families. The federal EITC will not impact certain public assistance benefits. In addition, federal EITC payments are typically NOT used to determine eligibility for the following:

(A) Medicaid

(B) Supplemental Security Income

(C) Supplemental Nutrition Assistance Program

(D) Low-income housing

(E) Temporary Assistance for Needy Families payments

To receive the federal EITC, you must file a federal tax return and fill out the EITC form, which can be found in the Federal Income Tax Return Booklet. For additional information on your eligibility to receive the federal EITC and other federal antipoverty tax credits, visit www.irs.gov.

California Earned Income Tax Credit (California EITC) and Young Child Tax Credit (YCTC) – The California EITC and YCTC are refundable credits for low-income working individuals and families. The California EITC and YCTC are similar to the federal EITC and will not impact certain public assistance benefits.

Foster Youth Tax Credit (FYTC) – The FYTC is a refundable credit for former and current foster youth between 18 and 25 years of age who were in foster care while 13 years of age or older. The FYTC will not impact certain public assistance benefits.

To claim the California EITC, you must file a California Income Tax Return and fill out the California EITC form (Form FTB 3514) and attach it to your tax return. For additional information on the availability of the credit, including eligibility requirements, or form questions, visit www.ftb.ca.gov and enter “CalEITC” in the search box.

You may also be eligible to have both your federal and state tax returns prepared and filed for free using VITA services. For additional information on the free tax filing service, and location and hours of operation, visit www.ftb.ca.gov and enter “VITA” in the search box.

Additionally, you may be eligible to e-file your California return directly with the Franchise Tax Board for free using CalFile. For additional information on CalFile, visit www.ftb.ca.gov and enter “CalFile” in the search box.

Colorado

For tax years beginning January 1, 2023 and after, employers must provide all employees with a written notice of the availability of the federal and state EITC and the federal and state child tax credits. The notice must be provided at least once per year.

An employer may send the written notice to employees electronically, including via email or text message. 

A sample notice is available on the Colorado state website.

Illinois

Employers are required to notify employees that they may be eligible for the federal EITC each year, unless the employee receives gross wages that exceed the maximum amount that may qualify for the federal EITC.

The employer must provide the following notice by giving or mailing it to the employee:

• Any notice available from the Internal Revenue Service for this purpose, including IRS Form 797; or
• Any notice created by the employer, as long as it contains substantially the same language as the IRS notice.

The EITC notice must be furnished within one week before or after, or at the same time, that the employer provides a Form W-2 to any employee.

Louisiana

In general, all employers with 20 or more employees must notify new employees about the EITC at the time of hire. These employers must also post a Louisiana state EITC notice in the workplace.

Maine

Employers must post and keep posted a copy of the EITC notice published by the state Bureau of Labor. This notice is included in the Regulation of Employment poster.

Maryland

On or before December 31 each year, all Maryland employers must provide an electronic or written notice to an employee who may be eligible for the federal and Maryland EITC. Employers may choose to notify all of their employees or just those with income at or below the maximum for EITC eligibility. Go to the Maryland state website to obtain this year’s notice.

New Jersey

All employers must give written notice to employees who may be eligible for the federal and/or New Jersey EITC each year. The notice must be provided between January 1 and February 15. The required notice is available on the New Jersey state website. Employers must notify employees, ages 18 and over, whom they know or reasonably believe may be eligible for the federal credit and/or NJ EITC, based on each employee’s prior year wages.

Oregon

All Oregon employers must notify their employees about the federal and state EITC each year. The notice must be provided with the employee’s W-2 and must:

• Be in English and in the language the employer typically uses to communicate with the employee.
• Include website addresses for the Internal Revenue Service and the Oregon Department of Revenue where the employee can find information about the state and federal EITC.

A sample notice is available on the Oregon state website. 

Philadelphia

Employers in Philadelphia are required to provide a notice to their employees each year about the programs below: 

• The federal EITC
• The federal Child Tax Credit (CTC)
• The Philadelphia Wage Tax Refund Program

Employers must typically provide the notices at the same time they give employees their W-2, or comparable forms. 

Texas

All Texas employers must notify their employees of the federal EITC no later than March 1 of each year. An employer may provide the notice in any of the following ways:

• In person
• Electronically at the employee’s last known email address
• Through a flier included with a pay stub (wage statement), in paper or electronic form
• By first-class U.S. mail to the employee’s last known address

Employers may use IRS Notice 797 or a written statement with the same wording as IRS Notice 797 when notifying employees.

Virginia

All employers must post notices in the workplace about the federal EITC and the state Credit for Low-Income taxpayers. The notices must be posted in the same location where other employee notices required by state or federal law are posted. The required notices are available on the Virginia state website.

Conclusion

Determine whether you are subject to any EITC notice requirements and ensure compliance if you are.