California has enacted legislation that significantly expands a requirement for employers to notify employees about federal and state earned income tax credits (EITCs). The changes are effective with notices furnished on or after Jan. 1, 2024.
The details
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Current Law
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Effective Jan. 1, 2024
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Employers must notify all employees that they may be eligible for federal and state EITCs.
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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 the federal and state EITCs.
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The 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.
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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.
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Employers must provide the notice by handing it directly to the employee or mailing it to the employee’s last known address.
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Employers must provide the first notice by handing it directly to the employee or mailing it to the employee’s last known address. Notwithstanding the above, the employer may send the first notice to an email account of the employee's choosing but only if the employee affirmatively, and in writing or by electronic acknowledgment, opts into receipt of electronic statements or materials.
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No requirement for a follow-up notice.
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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.
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Notice Requirements
Effective Jan. 1, 2024, both the first and second 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.
Next steps
· ADP TotalSource® sends year-end notice mailings out to employees regarding eligible tax credits where mandated. We anticipate that the mailings will be updated to meet California’s expanded requirements.
Please contact your ADP® Service Representative with any questions.