Employers

As an employer in the region, you have an opportunity to make a significant impact on your employees and the community. With this influence, comes responsibility.Please take a moment to read the information below to find out how you can, with very little effort, advocate for your employees and their economic well-being.

What is the EITC?

The Earned Income Tax Credit (EITC) is the single largest tool for poverty reduction being used in the United States today. Congress originally created the tax credit in 1975, in part to offset the burden of Social Security taxes and to provide an incentive to work. The EITC is for people who work hard but don’t earn high incomes. This is a federal tax credit available for qualified low income families and individuals designed to get money back into the hands of those who need it most. They do not have to owe taxes in order to claim the credit. When the EITC exceeds the amount of taxes owed, it results in a tax refund to those who claim and qualify for the credit.

The average EITC refund in Central Oregon is $1,300. In total, the EITC brings over $20 million to the tri-county area. Our goal is to reach the 25% of the population who qualify for the EITC but do not file for it. For the 2009 tax year, the thresholds for earned and adjusted gross income (AGI) must be less than:

The threshold amounts for 2009 tax returns are:
• $13,440 ($18,440 if married filing joint) if you do not have a qualifying child
• $35,463 ($40,463 married filing jointly) if you have one qualifying child
• $40,295 ($45,295 married filing jointly) if you have two qualifying children
• $43,279 ($48,279 married filing jointly) if you have three or more qualifying children

The maximum EITC for 2009:
• $5,657 with three or more qualifying children
• $5,028 with two qualifying children
• $3,043 with one qualifying child
• $457 with no qualifying children

What is the Advance Earned Income Tax Credit?

Eligible employees can receive part of their EITC for the current year in their paychecks throughout the year, instead of waiting until they file their tax returns. To be eligible for this Advance Earned Income Credit (Advance EIC) payment, an employee must expect to have a qualifying child, expect to fall within certain income limits, and expect to meet other specific requirements, The employee who wants the credit must give his or her pay employer a completed and signed Form W-5, Earned Income Credit Advance Payment Certificate. The advance payment is added to the employee's net pay for the pay period. A new completed W-5 form is required each year to continue the Advanced EIC.

Click here for a current W-5 from the IRS
Click here for a currrent W-5 in Spanish from the IRS

Why should I promote the EITC and Advance EITC?

Promoting the EITC is an opportunity for you to supplement the wages of your qualifying workers by encouraging them to take advantage of a government program that is specifically targeted to help low to moderate income working families. Also, promoting this benefit to employees can be of great benefit to the community.

By promoting the EITC you are encouraging individuals to claim their benefits. The Advance EITC also makes sure that families can use part of their benefit to cover current expenses rather than collecting the entire amount once a year. In addition, EITC benefits provide a stimulus to the local economy, as research shows that the monies received are for the most part, spent locally, thus helping the community overall.

Does the EITC cost me or hurt my bottom line?

EITC payments do NOT cost the employer money! In fact, this program provides an immediate increase in pay for the employee without impact to the employer's payroll costs. For the Advance EITC payments, employers simply subtract the advance payments they have added to their worker's paychecks from the total taxes withheld from all employees they would otherwise deposit with the IRS. Most automated payroll systems handle EITC calculations.

How do I calculate the Advance EITC?

Wage-bracket and percentage method tables are provided annually by the IRS in Circular E for employers to determine the amounts of advance EITC payments they must provide to employees who have provided a completed Form W-5. These tables are based on all compensation paid to an employee that are subject to federal income tax withholding. If the employee has claimed an exemption from withholding on his or her Form W-4, earned income is the wages that would have been subject to withholding without the exemption. For more details, go to items #10 and #16 in IRS Publication 15

Click for more information click below:
Tax Credit Home
Tax Filers
Frequently Asked Questions
Filing Locations
Volunteers
Take Credit Coalition