Guide to Low Income Tax Credits

Author Rosemary R. French, President Benchmark Institute

Publisher Benchmark Institute www.BenchmarkInstitute.org

Three Guidelines for Legal Services Advocates ...... 4

Low Income Tax Credits: Overview ...... 5 The Earned Income Tax Credit ...... 5 State Earned Income Tax Credits ...... 6 California (SB 80) ...... 7

Child Tax Credit ...... 8 Qualifying Child Limitations Additional Child Tax Credit

The Child and Dependent Care Credit ...... 10 Requirements Credit Amount Claiming the Credit

State Child and Dependent Care Credits ...... 10 California

The Earned Income Tax Credit ...... 12 Category Eligibility ...... 12 Qualifying Child Custodial Parents SSN # Requirement Immigrants

Financial Eligibility ...... 12 Resources Earned Income Chart

Procedural Eligibility ...... 15 Filing for Past Tax Refunds

Benefit Amount ...... 15 The EITC Estimator

Earned Income Credit and Child Tax Credit Comparison Chart 2015 ...... 16

Credit Impact on Public Benefits ...... 17 American Taxpayer Relief Act of 2012 ...... 17 California SSI Veterans’ Benefits Housing Public charge

Warning: RALs, RACs and other Rip-offs ...... 19 Fringe Preparers ...... 20 California RAL Statute ...... 20

______GUIDE TO LOW INCOME TAX CREDITS 2 © 2014 BENCHMARK INSTITUTE Client Communities Least Likely to File ...... 22 Workers with Disabilities & Families Raising Children with Disabilities...... 22 Domestic Violence Survivors ...... 22 Foster Parents ...... 22 Grandparents Raising Grandchildren ...... 23 Low Income Workers without Children ...... 23 Native Americans ...... 23 Refugees ...... 24 Veterans ...... 24

Free Tax Preparation ...... 25 VITA (Volunteer Income Tax Assistance) ...... 25 TCE (Tax Counseling for the Elderly) ...... 25 Facilitated Self-Assistance ...... 25 Free File ...... 25 I-CAN! ...... 25 The Armed Forces Tax Council ...... 25 California ...... 25

Resources ...... 26 Internal Revenue Service ...... 26 EITC Home Page EITC Marketing and Communication Tools The EITC Assistant IRS e-file Refund Cycle Chart Low-Income Taxpayer Clinics (LITC) The Taxpayer Advocate Service (TAS)

Center on Budget and Policy Priorities ...... 27 “Money Talks! Have You Heard?” Community Outreach Kit The National EITC Outreach Partnership

State EITC On-Line Resource Center ...... 27

Tax Credits for Working Families Blog ...... 27

The EITC: Good for Our Families, Communities and Economy – 2012 ...... 27

Interactive Tools ...... 27

Quick Links to Flyers and Resources ...... 28

1. Always ask: Is the client, family member or friend currently working, or has worked within the last three years? Educate. Alert community partners.

2. Consider clients who fall into groups least likely to file. Workers with Disabilities & Families Raising Children with Disabilities Domestic Violence Survivors Foster Parents Grandparents Raising Grandchildren Low Income Workers without Children Native Americans Refugees Veterans

3. Consider how tax credit may affect clients in your own housing, public benefit and family cases; e.g., is County Welfare Department incorrectly counting the refund as income or resource to make the client ineligible or lessen benefit amount? Is PHA or other housing provider counting it to determine eligibility for rental assistance or rent amount? Are domestic violence survivors receiving their payments in the safest possible way?

4. Refer clients to competent groups to advise and help them file for tax credits. (Quick Links to Flyers and Resources, p. 28)

______GUIDE TO LOW INCOME TAX CREDITS 4 © 2014 BENCHMARK INSTITUTE Recent ground-breaking research suggests the Low Income Tax income from the EITC and CTC credits leads to Credits benefits at every life stage. For example, children in families receiving the credits do

better in school, are likelier to attend college, Overview and can be expected to earn more as adults.2 Tax credits — amounts that reduce tax liability

— are among the most potent anti-poverty The tax system provides an administratively programs for families with children convenient way to aid low-income working families. Unlike most other agencies, the IRS Advocacy Alert: Our job as legal advocates is has reliable employer-provided information on to make sure our clients and client communities earnings, the basis for credit eligibility. And it’s take full advantage of these benefits — no easier for low-income families to claim credits matter what our practice specialty. on their tax returns than to apply for assistance at welfare offices—a major reason why more eligible people receive tax credits than TANF or Most tax credits are nonrefundable credits SNAP benefits. because they reduce tax liability to zero, but not

below. Refundable tax credits, on the other The Earned Income Tax Credit hand, reduce tax liability below zero, allowing The Earned Income Tax Credit (EITC), enacted filers to receive a refund. in 1975, is a refundable federal tax credit

available to assist working families and This Guide focuses on these low income tax individuals. The EITC provides more than $62 credits: 3 billion each year through the tax code. • Earned Income Tax Credit • Child Tax Credit • The Child and Dependent Care Credit The EITC is available to low and moderate- income workers regardless of their tax liability

— even if they don’t have to file or pay taxes. Impact The credit amount that taxpayers receive Refundable tax credits can substantially reduce depends on their income and the number of poverty among families with children. Absent qualifying children they have. any changes to the poverty measure except including tax credits in a family’s available Under current law, adults working full time at 1 resources, the Tax Policy Center estimates a minimum wage who have no children or are third fewer children would be in poverty. noncustodial parents are ineligible to receive any EITC benefits. These people would receive the Using the tax code to deliver assistance to low- maximum EITC if they had children. As a result, income families makes good sense. The credits low wage workers not raising minor children are are designed as work incentives. Many studies the only Americans whom the federal income show that the EITC encourages people – 2 particularly single moms – to enter the labor “EITC and Child Tax Credit Promote Work, force. Reduce Poverty, and Support Children’s Development, Research Finds” by Chuck Marr, Chye-Ching Huang, Arloc Sherman, and Brandon DeBot (April 3, 2015) http://goo.gl/DlJyrE 1Urban Institute and Brookings Institution http://www.taxpolicycenter.org/ ; 3 http://www.cbpp.org/research/policy-basics-the- http://www.taxpolicycenter.org/publications/url.cfm? earned-income-tax-credit ID=1000467

______GUIDE TO LOW INCOME TAX CREDITS 5 © 2014 BENCHMARK INSTITUTE tax taxes into poverty. Unfortunately, millions of dollars of EITC owed to eligible workers go unclaimed. National Advocacy Point: Low-wage, single filers need estimates are that approximately 15 to 25% of more help than the EITC currently offers them. eligible families do not claim the EITC they The size of the credit should be increased for have earned. Those not claiming the credit these taxpayers while maintaining its strength 4 generally fall into two categories: for households with children. (1) those that file and do not claim the credit Benefits since they were not aware of the credit and The EITC benefits families by:

• reducing the tax burden on workers— (2) those that don’t file at all, either because they especially the Social Security payroll tax are afraid to file or because they have no tax • supplementing wages liability and are not aware that EITC is refundable even if they have no tax liability. • making work more attractive than welfare The IRS reports that these groups are the most • reducing income equality and helping low- likely to not claim the EITC: income families build assets. • rural residents • self-employed people At its inception, the EITC was relatively small in • people with disabilities size, but several increases in the late 1980s and • people with no children early 1990s turned the EITC into largest federal • non-traditional parents e.g., grandparents aid program targeted to the working poor. • limited English speaking people • Native Americans The Center on Budget and Policy Priorities • people newly eligible (earnings have declined, calculates that the EITC was responsible for parental or marital status changed) lifting 6.2 million people out of poverty in 2013. • people not required to file In the 2013 tax year, over 27 million workers received the EITC; about $2,200 for a family with children and $259 for a household without Practice Tip: Here’s a role we can play with children. 5 very little effort — let our clients know about the EITC and allay any fears abut filing. This Families mostly use the EITC to pay for may be as simple as distributing flyers or necessities, repair homes, maintain vehicles that posting information on your web site with are needed to commute to work, and in some relevant information. cases, obtain additional education or training to • Download flyers and other information (21 boost their employability and earning power. 6 languages to chose from) here.

Benefits Go Unclaimed Recent Changes The 2009 Recovery Act (ARRA) added a “third 4 tier” for families with three or more children and "Investing in Work by Reforming the Earned Income allowed married couples to receive larger tax Tax Credit” proposes implementing a worker credit benefits. American Taxpayer Relief Act of 2012 based on individual earnings and not contingent on §103 extends these ARRA expansions through having children at home. http://www.taxpolicycenter.org/publications/url.cfm? the 2017 tax year. ID=2000232

5 http://www.cbpp.org/research/policy-basics-the- 6 http://www.eitcoutreach.org/home/outreach-tools/ earned-income-tax-credit

______GUIDE TO LOW INCOME TAX CREDITS 6 © 2014 BENCHMARK INSTITUTE Most workers receive the EITC as a lump sum California (SB 80)9 after filing their return. Congress recently Beginning with tax year 2015, the state’s first eliminated the ability to apportion sums in each Earned Income Tax Credit will help the poorest paycheck throughout the year. working families in California. This targeted credit provides a refundable tax credit that State Earned Income Tax Credits focuses on the lowest-income Californians — Twenty-seven states including DC have state households with incomes less than $6,580 (if no EITCs: Colorado, Connecticut, Delaware, dependents) or $13,870 (if three or more Illinois, Indiana, Iowa, Kansas, Louisiana, dependents). Maryland, Maine, Massachusetts, Michigan, Minnesota, Nebraska, New Jersey, New Mexico, About 2 million Californians are expected to New York, Ohio, Oklahoma, Oregon, Rhode benefit from the state credit. For families with Island, Vermont, Virginia, Washington, and income below $7,000, state and federal credits Wisconsin.7 combined will boost incomes by nearly 75 10 percent. And as of May 2015 … California. Features State-level EITCs make even more money The California credit matches 85% of the federal available to low-income workers. Twenty-three credit at the lowest income levels, with a state EITCs are refundable — available to maximum benefit of $2,653. The credit will workers even if they earn too little to owe state reach only about one-fifth of Californians who income taxes. State EITCs help offset the impact benefit from the federal credit -- households of sales and property taxes that have a with incomes less than $6,580 (no dependents) disproportionate impact on lower-income or $13,870 (three or more dependents). families. California’s EITC includes features that set it Most state EITCs follow federal eligibility rules, apart from other state EITCs: setting their benefit as a percentage of the  Only workers with earnings subject to wage federal credit, called the adjustment factor. The withholding will qualify for the credit; those calculation is very simple. Filers simply with self-employment income alone will not be multiply that percentage (which ranges from eligible. 3.5% to 40%) by the amount of their federal EITC to determine the amount of their state  The legislature will set the state benefit – a EITC. percentage of the federal credit - each year as part of the state budget. And this percentage, the States report very low administrative costs -- “adjustment factor,” will determine the size of typically less than 1 % -- so nearly every dollar a the credit for workers with earnings below levels state spends on the EITC goes directly to the working families in need of help. and Tiana Wertheim May 2006 http://www.brookings.edu/reports/2006/05childrenfa Three local governments — New York City, San milies_flacke.aspx; Francisco, and Montgomery County, Maryland 8 — offer local EITCs. 9 Amends Revenue and Taxation Code §§ 19136 and 19167 and adds § 17052 7 http://leginfo.legislature.ca.gov/faces/billTextClient.x http://www.cbpp.org/research/state-budget-and- html?bill_id=201520160SB80&search_keywords=Ea tax/policy-basics-state-earned-income-tax-credits rned+Incomeax+credit

8 http://www.workingfamiliescredit.org/ 10 http://calbudgetcenter.org/wp- content/ploads/2015_16-State-Budget-Package_First- “Delivering a Local EITC: Lessons from the San Look_06292015.pdf Francisco Working Families Credit” by Tim Flacke

______GUIDE TO LOW INCOME TAX CREDITS 7 © 2014 BENCHMARK INSTITUTE specified in state statute. If the legislature does To be eligible for the Child Tax Credit, single or not specify the adjustment factor in the budget, married workers must: then no state EITC will be provided that year. • Be able to claim an exemption for a dependent  The state credit will only be provided in years child under age 17 on their tax return; in which the budget provides resources to the Franchise Tax Board (FTB) to oversee its • Have taxable earned income above $11,300; administration and audit tax returns that claim and the credit. • Have either a Social Security number (SSN) or Outreach an Individual Taxpayer Identification Number13 The 2015-16 budget agreement also includes $22.0 million for the FTB to implement the Qualifying Child credit and conduct public outreach efforts to A qualifying child for this credit is someone promote it. A robust outreach effort will be who meets the qualifying criteria of six tests: critical to the state EITC’s success because the age, relationship, support, dependent, credit targets workers whose earnings are so low citizenship, and residence. that they likely do not have to file state taxes and may not be familiar with how filing works. Age Test - To qualify, a child must have been under age 17 – age 16 or younger – at the end of the current taxable year. Information Point: For California EITC find information on the Franchise Tax Board Relationship Test - To claim a child for website: California Earned Income Tax Credit purposes of the Child Tax Credit, she or he (EITC). must either be a son, daughter, stepchild, foster child, brother, sister, stepbrother, Information Point: For more information on stepsister or a descendant of any of these state EITCs or starting an EITC in your state, individuals, which includes a grandchild, see “A Hand Up: How State Earned Income Tax niece or nephew. An adopted child is always Credits Help Working Families Escape Poverty treated as taxpayer’s own child. An adopted 11 in 2011” and Flyer — State Earned Income child includes a child lawfully placed with 12 Tax Credits the taxpayer for legal adoption.

Support Test - In order to claim a child for Child Tax Credit (CTC) this credit, the child must not have provided Working families may be able to receive the more than half of their own support. benefits of the federal Child Tax Credit, worth up to $1,000 per child, for dependent children Dependent Test – Taxpayers must claim the under 17. While the Child Tax Credit has been child as a dependent on their federal tax around since 1998, Congress made changes to it return. in 2001 that allowed part to be refundable to working families with limited or no tax liability.

11 13 IRS issues ITINs to foreign nationals and others http://www.cbpp.org/cms/index.cfm?fa=view&id=34 who have federal tax reporting or filing requirements 74 and do not qualify for SSNs. http://www.irs.gov/individuals/article/0,,id=222209,0 12 http://www.eitcoutreach.org/home/outreach-tools/ 0.html

Residence Test - The child must have lived with the taxpayer more than half of the taxable year. There are some exceptions to the residence test, which can be found in IRS Publication 972, Child Tax Credit.

Limitations The credit is limited if modified adjusted gross income is above a certain amount. The amount at which this phase-out begins varies depending on filing status. For married taxpayers filing a joint return, the phase-out begins at $110,000. For married taxpayers filing a separate return, it begins at $55,000. For all other taxpayers, the phase-out begins at $75,000.

The Child Tax Credit is generally limited by the amount of the income tax owed as well as any alternative minimum tax owed.

Additional Child Tax Credit If the amount of Child Tax Credit is greater than the amount of income tax owed, taxpayer may be able to claim the Additional Child Tax Credit Schedule 8812.

Practice Tip: Publication 972 explains it all with examples.

Information Point: Information on CTC is included on EITC flyers at http://www.eitcoutreach.org/home/outreach-tools/

______GUIDE TO LOW INCOME TAX CREDITS 9 © 2014 BENCHMARK INSTITUTE The Child and Dependent Care Credit Credit Amount The Child and Dependent Care Credit is a tax The size of the Child and Dependent Care Credit benefit that helps families pay for child care they depends on the number of children or need in order to work or to look for work. The dependents in care, a family’s income, and the credit also is available to families who must pay amount the family paid for care during the year. for the care of a spouse or adult dependents It ranges from 35% to 20% of costs. People with unable to care for themselves. lower incomes get a higher percentage of costs than people with higher incomes. It can be as The Child and Dependent Care Credit reduces much as $1,050 for families with one child or the federal income tax that an eligible family dependent in care and up to $2,100 for families pays. Parents can claim as much as $3,000 in with more than one child or dependent in care. dependent care expenses per child (up to $6,000 for two or more children). Unlike the EITC, Claiming the Credit families earning too little to pay federal income To claim the Child and Dependent Care Credit, tax cannot use this credit. people must file Form 1040 or 1040A and Form 2441.

Advocacy Tip: The EITC and CTC do not affect a family’s eligibility for this credit. Practice Tip: Ten Things (the IRS wants you) Claiming all three credits, when possible, may to Know About the Child and Dependent Care mean even more money back from the IRS. 15 Credit

Requirements Families can claim this credit if they meet all State Child and Dependent Care Credits these requirements: 14 Twenty-eight states have child and dependent care tax provisions. Thirteen of those states • They pay for care for a qualifying child under provide refundable credits.16 age 17 claimed as a dependent, or a spouse or dependent not able to care for themselves, who California17 Since January 1, 2000, California lived with the family for more than half of the provides for a child and dependent care expense year credit equal to a percentage of expenses. Administered by the Franchise Tax Board, it • They need the child or dependent care to partially defrays expenses incurred by taxpayers work or look for work. In a two-parent family, who must care for children or other dependents both spouses must need the child or dependent so that they can be employed or seek care to work or to look for work unless one employment. spouse is a full-time student or unable to care for themselves.

15 • The amount of work-related expenses used to http://www.irs.gov/uac/Newsroom/Claiming-the- figure the credit cannot exceed their income for Child-and-Dependent-Care-Tax-Credit the year. 16 State Child and Dependent Care Tax Provisions, Tax Year 2012 http://www.nwlc.org/sites/default/files/pdfs/childand dependentcarecreditsfactsheet.pdf

17Q & A at 14 Child and Dependent Care Expenses are detailed in https://www.ftb.ca.gov/professionals/taxnews/2012/J IRS Publication 503 http://www.irs.gov/pub/irs- anuary/Article_3.shtml pdf/p503.pdf

The credit is available for direct expenses associated with such care — up to $3,000 for one child or dependent and up to $6,000 for two or more children or dependents. The California credit is calculated as a percentage of the similar federal credit.

The percentage allowed under the California program decreases as taxpayer adjusted gross income (AGI) increases. Thus, for taxpayers with AGIs of $40,000 or less, the credit percentage is 50% of the federal credit; for taxpayers with annual AGIs of $40,000 to $70,000, the credit is 43% of the federal credit; and for taxpayers with AGIs of $70,000 to $100,000, the credit is 34 % of the federal credit. The credit is not available to taxpayers with annual AGIs in excess of $100,000.

The maximum available credit for families with at least two children or dependents ranges from $1,050 for lower-income taxpayers to $408 for those with incomes of between $70,000 and $100,000.

Information Points: Law Summary California Child and Dependent Care Expenses (CDC) Credit and Form 350618

18https://www.ftb.ca.gov/forms/2012/12_3506.pdf

______GUIDE TO LOW INCOME TAX CREDITS 11 © 2014 BENCHMARK INSTITUTE The Earned Income Tax Credit Social Security numbers that permit them to work legally in the United States. Individual Taxpayer Identification Numbers (ITIN) Category Eligibility issued by the IRS to non-citizens and non- To qualify for EITC, people must work work Social Security numbers issued to during the filing year and applicants or recipients of federally funded benefits programs cannot be used to claim • be raising a qualifying child or the EITC.

• between ages 25 and 64 Immigrants also must be a “resident alien for tax purposes” for the entire tax year to claim “Qualifying Child” the EITC. Immigrants who were non- resident aliens at any time during the year • Sons, daughters, stepchildren, grandchildren, cannot claim the EITC unless they: and adopted children

• were married to a U.S. citizen or a resident • Brothers, sisters, stepbrothers, or stepsisters— alien as of December 31 of the tax year, as well as descendants of such relatives and

• Foster children who are placed with the worker • filed a joint tax return with the spouse and by an authorized government or private choose to be treated as a resident alien for placement agency the entire year.

Immigrants who are “resident aliens for tax Qualifying children must live with the worker purposes” include for more than half of the year. They must be under age 19, or under age 24 if they are full- • Lawful Permanent Residents time students. • Amnesty temporary residents and amnesty Workers may claim an individual with total family members granted “Family Fairness” and permanent disabilities of any age as a or “Family Unity” status “qualifying child” for the EITC if that person otherwise meets the EITC qualifying child • Refugees, asylees and those granted rules. Temporary Protected Status

Custodial Parents • Applicants for these and other immigration Custodial parents have priority in claiming statuses who have legal work authorization the EITC if other family members who live 19 and Social Security numbers. with the child could also claim the credit. Working custodial parents can claim their child for the EITC (and as a dependent) even Financial Eligibility

if the parent and child are living with another Resources relative who earns more than the parent. Workers with investment income exceeding

SSN $3,400 in tax year 2015 may not claim the Valid Social Security numbers are required for EITC. qualifying children born before December 31, 2006. 19 For more information on how resident alien status Immigrants is determined, see IRS Publication 519, US. Tax In order to claim the EITC, immigrant workers, Guide for Aliens their spouses, and children must each have valid http://www.irs.gov/publications/p519/index.html

______GUIDE TO LOW INCOME TAX CREDITS 12 © 2014 BENCHMARK INSTITUTE Earned Income for married workers) are eligible for a credit of To be eligible for the EITC, individuals must up to $6,242. have earned income. (See Figure1below) Most disability-related benefits are not • Workers without a qualifying child who earn considered earned income. Benefits such as less than $14,820 in 2015 (or less than $20,330 Social Security Disability Insurance, SSI, for married workers) are eligible for a credit of military disability pensions, and payments up to $503. from individually-purchased disability insurance policies are not counted as earned College Financial Aid income. Individuals who receive these types College students who work and are raising of benefits may qualify for the EITC and the children may be eligible to claim the EITC CTC refund if they, or their spouse, also have and CTC. Parents of full-time students earned income. under age 24 (or students of any age who have total and permanent disabilities) may People who receive long-term, employer-paid also be able to claim the EITC. Students disability benefits and are under minimum between ages 25 and 64 who are not raising retirement age can qualify for the EITC, even children and who work may also be eligible if they did not work during the tax year. Such for the EITC. disability benefits are considered taxable income, are reported as wages on tax returns • Non-taxable scholarships and grants are not and are considered earned income in considered income in determining eligibility determining eligibility for the EITC and the for the EITC or CTC; taxable grants and CTC refund. scholarships also are not considered “earned income,” but are included in determining Income Limits “adjusted gross income,” which may affect To be eligible for the EITC, individuals’ income eligibility for the EITC and CTC. must be below certain limits. Income limits change annually. Be sure to check for each • The EITC is counted as family income in 20 year’s limits. determining financial aid eligibility, but CTC refunds are not counted as family income. • Families with one child who earn less than However, for many low-income students $39,131 in 2015 (or less than $44,651 for who work, or their parents, the EITC will married workers) are eligible for a credit of up have no effect on financial aid amounts or to $3,359. eligibility. Adding the tax credit refund amounts to other income often will not cause • Families with two children who earn less than income to reach the threshold at which the $44,454 in 2015 (or less than $49,974 for student or family is required to contribute to married workers) are eligible for a credit of up the cost of education. to $5,548.

• Families with three or more children who earn less than $47,747 in 2015 (or less than $53,267

20 http://www.eitcoutreach.org/home/outreach- tools/resources/eligibility-information-2015/; http://www.irs.gov/Credits-&- Deductions/Individuals/Earned-Income-Tax- Credit/EITC-Income-Limits-Maximum-Credit- Amounts-Next-Year

Earned Income

Includes: Does not include:

• Interest and dividends Taxable Earned Income: • Social security and railroad retirement benefits • Wages, salaries, and tips • Welfare benefits • Union strike benefits • Workfare payments • Long-term disability benefits received before minimum retirement age • Pensions or annuities •Veterans’ benefits (including VA • Net earnings from self-employment rehabilitation payments) • Gross income received as a statutory • Workers’ compensation benefits employee • Alimony and Child Support • Exception: Military combat pay is non- • Non-taxable foster care payments taxable earned income, up to the highest • pay level for enlisted personnel. Combat Unemployment compensation (insurance) pay is counted to determine eligibility for • Earnings for work performed while an the CTC. Military personnel may choose to inmate at a penal institution count their non-taxable combat pay in • Taxable scholarship or fellowship grants determining eligibility for the EITC, if it is that are not reported on Form W- 2 advantageous to do so. Nontaxable earned income: If investment income exceeds $3,400, the • Salary deferrals (for example: under a EITC may not be claimed. Investment 401(k) plan) income includes taxable interest, tax-exempt • Military basic housing and subsistence interest, and capital gain distributions. allowances

• Meals or lodging provided by an employer For more detail, see IRS Publication 596, for the convenience of the employer "Earned Income Credit.” • Housing allowance or rental value of a ______Other tax benefits parsonage for the clergy Individuals who claim the federal Credit for • Excludable dependent care benefits the Elderly or the Disabled on their tax • Salary reductions such as under a cafeteria returns may also claim the EITC and CTC, if 21 plan eligible. • Anything else of value you get from an ______employer for services you performed even if it is not taxable

21 IRS Publication 524 http://www.irs.gov/pub/irs-pdf/p524.pdf

______GUIDE TO LOW INCOME TAX CREDITS 14 © 2014 BENCHMARK INSTITUTE Procedural Eligibility are physically or mentally unable to manage 22 their financial affairs. To receive the federal EITC, eligible working families and individuals must file a federal For more, see Q& A: How to Claim Tax income tax return and must fill out and attach Credits for Back Years 23 Schedule EIC

• Workers raising a “qualifying child” in their Advocacy Tip: Here’s another thing you can do home in 2015 must file either Form 1040 or without much effort — ask clients if they have 1040A and must fill out and attach Schedule filed for EITC credit in the last three years. And EIC. Workers with children cannot get the EITC then refer them to someone who can help. if they file Form 1040EZ or do not attach Schedule EIC. Married workers must file a joint • How to Help a Worker Who Filed a Tax return to get the EITC. Return but Didn’t Claim the EIC or CTC.24

• Workers who were not raising a “qualifying child” in their home in 2014 may file any tax form — including the 1040EZ. These workers Benefit Amount 25 write “EIC” (or the dollar amount of their The EITC Estimator credit) on the Earned Income Credit line on the The Earned Income Tax Credit Estimator gives tax form. They do not file Schedule EIC. workers a quick way to figure how much the EITC might be worth to an eligible family for • A correct name and Social Security number work performed during the taxable year. Just must be provided for every person listed on the type in annual earnings and the number of tax return and Schedule EIC. If this information children the worker is raising. The estimator is incorrect or missing, the IRS will delay quickly shows the EITC amount. the refund.

• Workers don’t have to calculate their own Advocacy Point: Knowing how much to expect EITC; if they choose, the IRS will do it for from the EITC can be a great motivator. them. Learning that folks are eligible to get a refund of several thousand dollars is enough to convince Filing for Past Tax Refunds anyone of the value of filing a tax return to Workers can file for tax credit refunds for the claim the EITC. last past three years. For example, in 2013 a worker who was eligible for the EITC and CTC in 2008 but did not claim them can fill out a Form 1040X, “Amended U.S. Individual Income 22 Pub. 556 Tax Return,” and attach it to a copy of the 2008 tax return he or she filed that year. Workers 23 http://www.eitcoutreach.org/home/faq- claiming a child for the EITC also must fill out factsheets/tax-filing-questions/how-to-claim-tax- and attach Schedule EIC for 2008. credits-for-back-years/

Generally, for a credit or refund, workers must 24 http://www.eitcoutreach.org/home/faq- file Form 1040X within 3 years (including factsheets/tax-filing-questions/how-to-help-a-worker- extensions) after the date they filed the who-filed-a-tax-return-but-didnt-claim-the-eic-or-ctc/

original return or 2 years after paying the tax, 25 http://www.eitcoutreach.org/home/outreach- whichever is later. The time limit for filing Form tools/the-eic-estimator/ 1040X can be suspended for certain people who

Earned Income Credit and Child Tax Credit Comparison Chart 2015 EITC CTC • 1 child—up to $3,359 • Up to $1,000 per child • 2 or more children—up to $5,548 • 3 or more children – up to $6,242 • Workers 25-64 w/no children—up to $503 Category Qualifying Child • Son, daughter, grandchild, stepchild or an adopted child Eligibility • Brother, sister, stepbrother or stepsister (and their descendents) • Foster child placed with worker by a government or private agency Child’s Residency • Must live with worker in the U.S. for more • Must live with worker in the U.S. for than half the year. more than half the year except if agreement permits non-custodial parent to claim the child as a dependent.

Child’s Age • Under age 19 • Under age 17 • Under 24 if a full-time student • Any age if totally and permanently disabled.

Dependency • Not required - except for a married parent • Required only for the non-custodial claim who separated from his or her spouse parent exception noted above. during the first half of the year Immigration • Worker, spouse and qualifying child must • Child must be a U.S. citizen or a each have a valid SSN that permits them to resident alien; in SSN or ITIN for work legally the U.S. parents and children is required. Financial Eligibility Sources of Earned Income • Wages, salary, tips • Earnings from self-employment • Union strike benefits • Employer-paid disability • Military combat pay (tax filer can choose to count for EITC, must count for CTC) Income • 1 child—under • Must earn more than $3,000. 39,131/$44,651* • 2 children—under 44,454/$49,974* • 3 or more —under 47,747/$53,267* • No children—under 14,820/20,330*

* married Resources • Investment income cannot exceed $3,400. • No limit on investment income

Conduct Eligibility n/a n/a Procedural • File Schedule EIC required for workers • File Form 8812 “Additional Child Tax Eligibility claiming children Credit” Impact on Public • Not considered income for SNAP, SSI, • Not considered income for any Medicaid, federal housing, foster care or federal, state, or local program financed Benefits adoption assistance. in part by federal funds. • Under 26 USC § 6409, counts as a resource • Under 26 USC § 6409, counts as a only after 12 months for any program resource only after 12 months for any receiving federal money. program receiving federal money. • Rules regarding other benefit programs are state-determined.

______GUIDE TO LOW INCOME TAX CREDITS 16 © 2014 BENCHMARK INSTITUTE Credit Impact on Public Benefits California California Departments of Health Care Services and Social Services exclude these payments in Advocacy Tip: The rules on how credits affect CalWORKs (TANF), CalFresh (SNAP) and financial eligibility are permanently changed by Medi-Cal. ACL 13-46 (June 10, 2013) American Taxpayer Relief Act of 2012. Effective January 1, 2013, counties must exempt all EITC payments and federal income tax credit The American Taxpayer Relief Act of 2012 and refund payments, from resource (Pub.L. 112–240, H.R. 8, 126 Stat. 2313) excludes federal tax refunds as income and consideration for CalWORKs applicants and resources for a period of 12 months after receipt recipients for 12 calendar months starting with for all federal means-tested programs. the month of receipt of the payment.

Internal Revenue Code § 6409 permanently Note: Resource limits are moot for some disregards any federal tax refund payments from because most non-assistance CalFresh consideration in the administration of any households have no resource limits. ACL 14-56 federally-funded or partially federally-funded (August 22, 2014). program. It provides: SSI Any federal tax refund (including, but EITC and CTC refunds are excluded from not limited to, over-withheld income resources for twelve months following the tax, EITC, CTC, or other tax credits) month the refund is received. The interest must be excluded as income in paid on EITC and CTC amounts held in determining eligibility or the amount savings also does not count as income in of benefits for any federally-funded or determining SSI eligibility. partially federally-funded public benefit program. POMS SI 01130.676 Federal Tax Refunds and Advanced Tax Credits Received On or After Tax refunds or credits that are saved January 1, 2010 will not count against resource limits http://policy.ssa.gov/poms.nsf/lnx/0501130676 for 12 calendar months after the refund is received (for both applicants This POMS section compares the previous 9 and recipients) for purposes of month rule with the American Recovery and determining eligibility or the amount Reinvestment Act Extension 12 month rule. of benefits under any federally-funded or partially federally-funded public Veterans’ Benefits benefit program. If a veteran receiving a Veteran's Affairs means- tested benefit saved the EITC or CTC refund, This amendment applies to tax refund or credit the amount would count as a resource. amounts received after December 31, 2012. However, because the resource limit for VA pension benefits is very high ($80,000, not The American Taxpayer Relief Act of 2012 also counting a home and a motor vehicle), unless a temporarily increases the maximum credit veteran already has substantial resources near receivable, amount for three or more qualifying this limit it is unlikely that saving the EITC or children, and the beginning point of the phase- CTC refund would affect eligibility for VA out range for the credit for all married couples benefits. filing a joint return. These changes are extended through the 2017 tax year.

______GUIDE TO LOW INCOME TAX CREDITS 17 © 2014 BENCHMARK INSTITUTE Housing HUD guidance specifically states that the EITC does not count as income for purposes of determining initial income eligibility for HUD Rental Assistance programs and is not counted for purposes of determining tenant rent payments. 24 CFR 5.609(c)(17); Updated List of Federally Mandated Exclusions From Income: (xiii) EITC refund payments received on or after January 1, 1991 (26 U.S.C. 32(l))26

Public charge The EITC and CTC do not create public charge problems for immigrant workers. Receiving tax credits is not considered an indication that immigrants are unable to support themselves financially.27

In general, information on a tax return is confidential. The IRS cannot share individual tax return information with other government agencies, including the USCIS. There are exceptions in cases involving federal criminal or terrorism investigations or when the IRS thinks someone is breaking a tax law.

26 Federal Register /Vol. 77, No. 142 /Tuesday, July 24, 2012 /Notices http://www.gpo.gov/fdsys/pkg/FR- 2012-07-24/pdf/2012-18056.pdf

27 See generally USCIS Public Charge Fact Sheet http://www.uscis.gov/news/fact-sheets/public-charge- fact-sheet

______GUIDE TO LOW INCOME TAX CREDITS 18 © 2014 BENCHMARK INSTITUTE Warning: RALs, RACs and other Rip-offs Information Point: Here’s a great brochure about the risks and costs of tax refund Targeted at EITC recipients, refund anticipation anticipation loans from the National Consumer loans (RALs) drain billions from low income Law Center that you can distribute to clients.30 consumer pockets. About 9 million consumers paid nearly $1 billion in RAL and associated fees in 2006. Nearly two thirds (5.7 million) of In essence, RALs are short-term bank loans these consumers received the EITC. In 2009, secured by tax refunds. The loans have 64% of RAL customers were EITC recipients.28 exorbitant interest rates — from 50% to 500% — usually accompanied by additional charges. Example: They expose taxpayers to the risks of unpaid From the EITC refund amount, here’s what the debt if their refunds do not arrive as expected. consumer receives: the refund minus the loan RALs also may include the return preparation fee, the add-on fees, and the tax preparation fee fee, enabling taxpayers to get services with no (averaging $165). For the typical refund of about out-of-pocket expense. RALs siphon away $2,600, the total amount of the two or three fees taxpayer refunds and are highly profitable to could be from $221 to $313, or some cases preparers and banks. nearly $500, leaving about $2100 to $2300. In their 2011 annual report on the RAL industry, Marketed often as “instant” or “rapid” refunds, the National Consumer Law Center and RALs are one to two week loans brokered by tax Consumer Federation of America report that RALs are on their way out because no banks preparers that advance expected tax refunds. 31 Instead of waiting to receive refunds, RAL will be making RALs in 2012. However, nonbank payday lenders appear to be entering customers borrow against part or all of their 32 expected tax refund. the RAL market.

They also report that beside RAL fees, Advocacy Point: Keep in mind that consumers consumers in 2009 paid another estimated $58 who use electronic filing and have a bank million in add-on fees, such “application,” account into which the refund can be direct “administrative,” “e-filing,” “service bureau,” deposited will usually receive a refund in 8 to 15 “transmission,” or “processing” fees. These fees days. IRS e-file Refund Cycle Chart 29 projects range from $10 to as high as $300. when a refund will be direct deposited or mailed based on when the IRS accepts the return. The next few years will likely see variations on the traditional RAL including return-linked Taxpayers without a bank account can get a fast prepaid cards with unfavorable terms and other refund by e-filing and having their refund deposited to a prepaid card, including any 30Don't Pay to Borrow Your Own Money: The risks existing payroll or prepaid card that the taxpayer and costs of Tax Refund Anticipation Loans already has. http://www.nclc.org/images/pdf/older_consumers/ral brochure.pdf

31 Wu and Fox “End Of The Rapid Rip-Off: An Epilogue For Quickie Tax Loans - The NCLC/CFA 2011 Refund Anticipation Loan Report” (February 2011) 28 Holt, “Ten Years of the EITC Movement: Making Work Pay Then and Now” (April 18, 2011) 32 Press Release: One Last Bite: Final Year for Bank http://www.brookings.edu/papers/2011/0418_eitc_ho Tax Refund Anticipation Loans, Jan. 17, 2012 lt.aspx http://www.nclc.org/images/pdf/pr-reports/ral-pr- 2012.pdf 29 http://www.irs.gov/pub/irs-pdf/p2043.pdf

______GUIDE TO LOW INCOME TAX CREDITS 19 © 2014 BENCHMARK INSTITUTE wealth-stripping products. An emerging concern have made efforts to improve their disclosures is the high use of refund anticipation checks or that RALs are loans, fringe preparers sometimes RACs among taxpayers preparing their own don’t even bother trying. Some fringe preparers returns. RACs are lower-cost, non-loan products give their businesses names that deceptively that are essentially one-use bank accounts into promote “fast refunds,” such as ‘AA Next Day which the IRS deposits the refund; the preparer Tax Cash’, ‘ASAP Rapid Refund Tax Service’, draws down preparation, filing, and RAC fees ‘Instant Refund’, ‘Quick Refunds’, ‘Rapid Tax and then provides the balance to taxpayers in a Refund’ and ‘Super Fast Express Refunds.’ paper check, prepaid debit card, or direct deposit transfer. The number of taxpayers receiving California RAL Statute RACs has increased to an estimated 14.6 California is one of the few states that have million taxpayers in 2010, up from the 12.9 registration requirements for paid tax preparers. million in 2009. The IRS has a handful of rules governing providers of electronic filing, but they mostly do not address competency. Information Point: National Consumer Law Center does an excellent job in explaining California Business & Professions Code RALs, RACs and other additional fee rip-offs § 22251 et seq. 34 and describing their devastating impact on the The RAL statute is part of the chapter requiring low income community. NCLC also has played tax preparer registration. a part in closing the nation-wide RAL industry down. Their web site contains useful reports and • Exemptions press releases.33 Attorneys, CPAs, enrolled agents, financial institutions IT’S A WILD WORLD: Consumers at Risk from Tax-Time Financial Products and Unregulated • Licensing or registration requirements: Preparers updates tax time shenanigans at the None, but California requests tax preparers to be beginning of 2014. registered and bonded.

• Disclosures Fringe Preparers Posting Tax preparers who make RALs must Fringe preparers include businesses associated display a schedule of current RAL fees, with exploiting consumers, including payday electronic filing fees, “dummy” account fees, loan stores, check cashers, and used car dealers. and other related RAL fees. Posting must Some retailers such as jewelry and furniture state that the consumer may have the return stores are also fringe tax preparers. In immigrant filed electronically without a RAL. Postings communities, businesses that offer travel must be in 28 point type on a 16 inch by 20 services, notario services, and quickie divorces inch document displayed in a prominent also offer tax preparation of varying quality. location.

One of the biggest problems with fringe preparers is the questionable quality of tax preparation. This may include filing tax returns without proper forms and even advising tax 34 fraud. http://law.onecle.com/california/business/22250.html; Fringe preparers also aggressively promote summarized in National Consumer Law Center, RALs and RACs. While commercial chains Model Refund Anticipation Loan Act (December 2008) Appendix A Http://Www.Nclc.Org/Images/Pdf/High_Cost_Small _Loans/Ral/Model-Refund-Anticipation-Loan- 33 http://www.nclc.org/issues/refund-anticipation- Act.Pdf loans.html

______GUIDE TO LOW INCOME TAX CREDITS 20 © 2014 BENCHMARK INSTITUTE Written disclosures. • Civil/Criminal Penalties: Before completing the application, the Violation is a misdemeanor punishable by preparer must disclose: $1,000 fine or 1 year in jail.

(1) the RAL loan fee schedule (2) that a RAL • Private Right of Action: Yes. “Any person” is a loan and not the actual refund; (3) that the may seek injunctive relief or $1,000 civil consumer may have the return filed penalty plus attorney’s fees. (Violation might electronically without a RAL; (4) the estimated also constitute violation of Cal. Bus & time in which the consumer could expect to Prof. Code § 17200.) receive the refund with electronic filing and direct deposit/mail or with paper filing and Other Provisions The RAL contract must be direct deposit/mail; (5) that the IRS does not translated into Spanish, Chinese, Tagalog, guarantee the amount or time of the payment of Vietnamese, or Korean if the RAL was a refund; (6) that the consumer is responsible negotiated in that language. for repayment of the loan in the event the refund is not paid or is not paid in full; (7) the Litigation estimated time when the consumer will receive People v. JTH Tax, Inc., 212 Cal.App.4th the loan proceeds; and (8) the fee if the RAL is 1219, 151 Cal. Rptr. 3d 728 (2013) not approved. AG sued JTH, dba as Liberty Tax Service for Before loan is consummated, the preparer violating truth in lending (TILA), unfair must disclose: (1) the estimated total RAL competition, consumer protection, and false fees; (2) the estimated APR under the Truth advertising laws. in Lending Act; (3) a comparison of the costs of receiving a refund directly from IRS, with Liberty provides tax preparation and related loan a RAL, with a RAL, and with any other tax services (refund anticipation loans and financial product. “electronic refund checks”), with 195 franchised stores in California, and two company-owned There is no mandatory type size or language stores. for the written disclosures. The court found that Liberty’s ERC fees were a • Advertising. Any advertisement that mentions a form of credit allowing delayed payment for tax RAL must state conspicuously that it is a loan, preparation services and its failure to disclose that a fee or interest will be charged, and the finance charges violated TILA, the UCL and name of the lending institution. FAL. Among other things, Liberty was enjoined from representing a RAL as an actual refund and • Prohibited Acts: failing to state conspicuously that the product is (1) Representing the loan as a client’s actual a loan and including the lending institution’s refund; name and the fee or interest it will charge.35

(2) requiring the consumer to obtain a RAL to Liberty was held vicariously liable for its complete tax preparation; franchisees’ advertising resulting in an award of

$1.169 million in civil penalties and $135,000 in (3) misrepresenting a material factor or restitution. condition of the RAL;

(4) failing to process the RAL application 35 promptly; or http://www.leagle.com/decision/In%20CACO%2020 130117021.xml; (5) engaging in fraud in connection with a RAL. http://tushnet.blogspot.com/2013/01/calculation-of- remedies-and-vicarious.html

Likely to File Information Point: The EIC Can Help Workers with Disabilities and Families Raising Children • Workers with Disabilities & With Disabilities38 Families Raising Children with Disabilities ______Individuals who receive disability benefits may qualify for the EITC and the CTC refund if they, • Domestic Violence Survivors or their spouse, also have earned income. National Women’s Law Center has created a checklist to describing the issues domestic Most disability-related benefits, such as Social violence survivors might face and shares Security Disability Insurance, SSI, military resources for free tax preparation, disability pensions, and payments from representation, and advice. individually-purchased disability insurance policies are not counted as earned income. A webinar also explains how federal and state tax credits can help survivors of domestic However, special rules do make it possible for violence, offering resources that can help people receiving Social Security disability survivors and advocates. benefits or Supplemental Security Income (SSI) to work (have earned income) and still receive The slides may be downloaded here. monthly benefit payments. These folks would Tax Issues for Domestic Violence Survivors: qualify for tax credits. What Advocates Need to Know39

• Foster Parents Information Point: For a general reference Claiming EITC and CTC may be especially source about the employment-related provisions beneficial for eligible foster parents: of Social Security Disability Insurance and the Supplemental Security Income Programs, • Households with foster children are more consult The Red Book - A Guide to Work likely than other households with children to 36 Incentives receive cash public assistance (i.e., TANF and SSI), and about equally likely to receive Working While Disabled—How We Can Help37 food stamps. is a straightforward client education piece. ______• 80% of households with foster children include at least one person who worked Workers may claim a person with total and either full time (56%) or part time (24%). permanent disabilities of any age as a “qualifying child” for the EITC if that person otherwise meets the qualifying child rules. For • A larger share (27%) of households with example, parents may claim their adult children foster children earns less than $30,000 if they have such disabilities. Also, persons who are caring for relatives with such disabilities who meet the other rules for a “qualifying child” 38 http://www.eitcoutreach.org/home/outreach- may be able to claim them for the EITC. strategies/strategies-for-communities/workers-with- disabilities-and-families-raising-children-with- disabilities/fact-sheet-on-the-tax-credits-and-people- with-disabilities/

39 http://www.nwlc.org/resource/tax-issues-domestic- violence-survivors-what-advocates-need-know ; http://eitcoutreach.org/home/outreach- 36 http://www.ssa.gov/redbook/ strategies/strategies-for-communities/domestic- violence-survivors/ 37 http://www.ssa.gov/pubs/10095.html ______GUIDE TO LOW INCOME TAX CREDITS 22 © 2014 BENCHMARK INSTITUTE compared to other households with children (24%). Information Point: The Earned Income Credit and Child Tax Credit Can Help Workers Who Are Grandparents Raising Grandchildren41 • About 15% of households with foster children include a householder or spouse with a disability compared to 7% of all • Low Income Workers without Children households with children. Very low-income workers who are not raising children in their home are eligible for a small Earned Income Tax Credit. Even workers whose Information Point: The Earned Income Credit earnings are too small to have paid federal (EIC) and Child Tax Credit (CTC) Can Help income tax can get the credit. Workers Who Are Foster Parents40

EITC provides a financial boost to those who work at very low wages or are only able to find • Grandparents Raising Grandchildren part-time work. This includes many day About 2.6 million grandparents are responsible laborers, migrant workers, temporary for most of the basic needs (i.e., food, shelter, employees, people who are homeless and and clothing) of one or more grandchildren general assistance recipients who worked part of living with them. the year.

More than half of these grandparents are still in This may be a difficult group to reach: the labor force and may qualify for the EITC and • For some, the EITC may seem too small to CTC. In 2009, half a million grandparents were make filing a tax return worthwhile. raising one or more grandchildren with no parent present and may qualify for the EITC. Another • Some may fear entering the tax system one million grandparents were the primary either because they haven’t filed taxes in a earner in a family with both a child and long time or because they owe child support. grandchild and may qualify for the EITC.

• Very low-income workers may be • 19% of grandparents raising grandchildren skeptical of information about programs earn an income that is below the poverty from government agencies such as the IRS. level. ______

• In grandparent-caregiver households where Advocacy Tip: Outreach materials should the parent of the grandchild is absent, the contain the name and number of a contact median income is $34,782, which is within organization that is trusted by low income the income limits to qualify for the EITC. workers in your community. Not Living With Children? You May Qualify for the • 23% of the grandparents who are EIC42 responsible for caring for their grandchildren speak a language other than English at home.

41 http://eitcoutreach.org/home/outreach- strategies/strategies-for-communities/foster-parents- grandparents-raising-grandchildren-and-other- relative-caregivers-3/foster-parents-grandparents- 40 http://eitcoutreach.org/home/outreach- raising-grandchildren-and-other-relative-caregivers/ strategies/strategies-for-communities/foster-parents- grandparents-raising-grandchildren-and-other- 42 http://eitcoutreach.org/wp- relative-caregivers-3/foster-parents-grandparents- content/uploads/Workers-Not-Living-With-Children- raising-grandchildren-and-other-relative-caregivers/ 2014.pdf

______GUIDE TO LOW INCOME TAX CREDITS 23 © 2014 BENCHMARK INSTITUTE • Native Americans ______Building Native Communities: A Tribal Leader’s Guide to Launching an Earned Income Tax Information Point: Tax Credit Outreach to Credit Campaign (2005).43 by First Nations Military Veterans 44 Oweesta Corporation (FNOC) is designed to help tribal leaders conduct tax credit outreach. This guide includes many resources including an overview of the EITC and how Native families  Individuals Released From Prison or and communities can benefit from claiming it Workers with a Relative in Prison and a list of ten things tribal leaders can do to People with criminal records often have promote the EITC. extremely low resources. They work at low- wage or intermittent employment, making it • Veterans difficult to achieve financial stability. The EITC Many veterans are either unemployed or and CTC can provide additional support for underemployed. They may be forced to settle for eligible former prisoners improving their ability part-time jobs or sporadic employment that may to obtain long-term employment and reduce the not pay enough to meet their basic needs. risk of recidivism. Employers may fail to adequately translate the military skills and experiences of recently Individuals cannot receive the EICT or the CTC separated service members into qualifications based on their earnings in prison. However, if for civilian jobs. Reservists returning from individuals work and earn income during the combat often are not promptly reemployed, or same year that they enter prison, they may do not receive the pay, pensions, health care qualify to claim these tax credits. coverage, and other benefits to which they are entitled. In addition, the Work Opportunity Tax Credit

(WOTC) encourages employers to hire Tax credit information and free filing individuals recently released from prison. information are often missing from transitional WOTC can reduce employers’ federal income veteran’s services. No longer with access to the tax liability by as much as $2,400 for every free tax assistance offered at military posts, lack qualified new worker hired from one of nine of information about tax credits and free tax categories, including former prisoners. New preparation assistance programs can lead employees must be hired within one year of the veterans to pay costly commercial preparer fees last date on which they are released from and can make them targets for more expensive prison.45 refund anticipation loans and tax scams.

Information Point: 46  Fact Sheets and flyers 47  IRS Educational Materials

44 http://eitcoutreach.org/home/outreach- strategies/strategies-for-communities/military- personnel-returning-veterans-and-their-families/

45 http://www.doleta.gov/business/incentives/opptax/eli gible.cfm

46 http://eitcoutreach.org/home/outreach- strategies/strategies-for-communities/individuals- 43 http://www.oweesta.org/our_publications released-from-prison-or-workers-with-a-relative-in- prison/

______GUIDE TO LOW INCOME TAX CREDITS 24 © 2014 BENCHMARK INSTITUTE Free Tax Preparation Free File Low-income taxpayers have a number of options Free File provides brand-name software or for free tax preparation. online Fillable Forms. Everyone can use IRS Free File. If adjusted gross income was $60,000 VITA (Volunteer Income Tax Assistance) or less in 2014, taxpayers may use brand-name The VITA Program generally offers free tax software to do taxes for free. Participating help to people who make $50,000 or less and software companies make their products need assistance in preparing their own tax available through the IRS. Some also support returns. IRS-certified volunteers provide free state tax returns. basic income tax return preparation to qualified individuals in local communities. They can Anyone may use IRS forms for free. inform taxpayers about special tax credits for http://www.irs.gov/efile/article/0,,id=118986,00.ht which they may qualify such as Earned Income mlhttp://freefile.irs.gov/index.html Tax Credit, Child Tax Credit, and Credit for the Elderly or the Disabled. VITA sites are I-CAN! generally located at community and Free e-file site where federal as well as certain neighborhood centers, libraries, schools, State returns may be filed including California shopping malls and other convenient locations. for a nominal fee. Legal Aid Society of Orange Most locations also offer free electronic filing. County has partnered with TaxACT. Also http://irs.treasury.gov/freetaxprep/; 1-800-906- available in Vietnamese. 9887 http://www.icanefile.org/

TCE (Tax Counseling for the Elderly) The Armed Forces Tax Council The TCE Program offers free tax help for all The Armed Forces Tax Council provides free with priority assistance to people who are 60 tax assistance to service members at military years of age and older, specializing in questions Volunteer Income Tax Assistance (VITA) sites. about pensions and retirement issues unique to Current service members, their spouses, and seniors. IRS-certified volunteers who provide retired military personnel are eligible for these tax counseling are often retired individuals sites. While there is no central list of all military VITA sites, all Navy VITA sites are listed associated with non-profit organizations that 48 receive grants from the IRS. here. Military VITA sites usually will prepare http://www.aarp.org/applications/VMISLocator/s taxes for service members from other branches earchTaxAideLocations.action; 1-888-227-7669 http://irs.treasury.gov/freetaxprep/; 1-800-906-9887 Facilitated Self-Assistance In addition to traditional face-to-face tax California preparation, the IRS is launching a self- Franchise Tax Board lists e-filing options to file assistance service at select locations. If in California. individuals have a simple tax return and need a https://www.ftb.ca.gov/individuals/efile/allsoftwar e.shtml little help or do not have access to a computer, they can visit one of the participating tax VITA and TCE volunteers in California are preparation sites and an IRS-certified volunteer trained to file California returns as well as will guide them through the process. federal returns. http://www.irs.gov/individuals/article/0,,id=10762 6,00.html .

48 47 http://www.irs.gov/Individuals/Prisoner-Re-entry- www.jag.navy.mil/organization/documents/tax/VITA Program _Sites.pdf

______GUIDE TO LOW INCOME TAX CREDITS 25 © 2014 BENCHMARK INSTITUTE Resources IRS e-file Refund Cycle Chart Internal Revenue Service Based on when the IRS accepted the return, this chart projects the date the refund will be direct EITC Home Page deposited or mailed. This date is based on • Do You Qualify for EITC? normal processing and assumes the return does • Need Help Preparing Your Return? not require further review. If the return does • Find information on EITC and other Public require review and additional information is Benefits and Other Child-Related Tax Benefits needed, the taxpayer will receive a notice. For • Other Resources and Tips for Claiming EITC the most up-to-date information on refunds, go • Resources and Tips if You Receive a Notice to www.irs.gov and click on Where’s My from IRS or are Audited Refund? to check on any changes to the • IRS Reports on EITC projected date shown below. • Missing Children Link http://apps.irs.gov/app/vita/content/globalmedia/ir http://www.irs.gov/individuals/article/0,,id=96406,00.ht s_efile_refund_cycle_chart_4012.pdf ml Low-Income Taxpayer Clinics (LITC) EITC Marketing and Communication Tools The Low Income Taxpayer Clinic program EITC Central has the latest news on EITC. Plus, serves individuals who have a problem with the fact sheets, statistics, marketing tools, ready- Internal Revenue Service and whose income is made information flyers and posters, below a certain level. LITCs are independent customizable products, templates, links to other from the IRS. Most LITCs can provide helpful resources. representation before the IRS or in court on audits, tax collection disputes, and other issues EITC Central has specialized sections designed for free or for a small fee. If an individual’s for partners, preparers, and press and EITC native language is not English, some clinics can Marketing Express where people customize provide multilingual information about taxpayer flyers and posters with name, logo, phone rights and responsibilities. number, hours of service and web address.

LITCs generally do not provide tax preparation Access brochures, payroll stuffers, newsletter articles, marketing ideas and more to help services but refer clients to free tax preparation communicate EITC information to employees, resources described above. : clients and customers. http://www.irs.gov/advocate/article/0,,id=106991,0 http://www.eitc.irs.gov/central/main/ 0.html; http://www.irs.gov/pub/irs-pdf/p4134.pdf

The Taxpayer Advocate Service (TAS) The EITC Assistant TAS is an independent organization within the The EITC Assistant helps calculate if a worker IRS. TAS helps taxpayers who are experiencing is eligible for the EITC and the amount in economic harm, such as not being able to English and en Español for tax years 2012, 2011 provide necessities like housing, transportation, and 2010. http://www.irs.gov/Individuals/Earned-Income-Tax- or food; taxpayers who are seeking help in Credit-(EITC)-%E2%80%93--Use-the-EITC-Assistant- resolving problems with the IRS; and those who to-Find-Out-if-You-Should-Claim-it. believe an IRS system or procedure is not working as it should. Go here to read the ten things every taxpayer should know about TAS. http://www.taxpayeradvocate.irs.gov/Individuals/ Get-Tax-Help

______GUIDE TO LOW INCOME TAX CREDITS 26 © 2014 BENCHMARK INSTITUTE Center on Budget and Policy Priorities, Tax Credits for Working Families Blog “Money Talks! Have You Heard?” Tax Credits for Working Families blog is an Community Outreach Kit online forum for advocates, policymakers, This Kit provides a guide to outreach strategy on business leaders, researchers and journalists the EITC and Child Tax Credit, fact sheets and interested in key federal and state tax credits that outreach tools such as flyers, posters and support working families. envelope stuffers to organizations planning to This is the best place to go to be updated on conduct community outreach efforts on tax what’s happening in Congress throughout the credits for low- and moderate-income workers. year. The Kit is updated each year and distributed to http://www.taxcreditsforworkingfamilies.org/blog/ over 15,000 organizations. The EITC: Good for Our Families, A free hard-copy of the Kit will be mailed to any Communities and Economy - 2012 organization which requests it. Requests for the While the EITC is best known for boosting Kit can be made at the website, which also working families’ earnings and lifting about six provides translations of an outreach flyer in 19 million households from poverty every year, a languages other than English and Spanish. new brief, “The Earned Income Tax Credit: www.eitcoutreach.org. Good for Our Families, Communities and Economy,” discusses how the credit’s values The National EITC Outreach Partnership also extend to strengthening children’s education The National EITC Outreach Partnership formed outcomes, families’ health outcomes, and local during 2011 by national organizations, including economic vitality. federal government agencies that consider it http://www.taxcreditsforworkingfamilies.org/wp- important to promote Earned Income Tax Credit content/uploads/2012/01/NCTC-EITC- (EITC) outreach, free tax preparation paper_Jan2012.pdf alternatives, and asset development strategies.

The state links in this section are descriptions of Brookings Institute local EITC coalitions that provide outreach and Interactive Tools Display and download ZIP code-level tax return free tax preparation. These are coalitions in information for states, metro areas, counties, existence as of August 2011 and will be updated cities, and state legislative and congressional semi-annually. http://www.cbpp.org/eitc-partnership/directory.htm districts for tax years 1997 through 2010. http://www.brookings.edu/metro/EITC/EITC- Homepage.aspx Tax Credits for Working Families State EITC On-Line Resource Center Provides ready access to research, resources and updated information about state Earned Income Tax Credits and efforts to enact the credit in particular states. It features a “50 State Resource Map,” providing a quick status report on each state’s EITC or efforts to enact one, as well as a state contact for more information. http://www.taxcreditsforworkingfamilies.org/?pag e_id=7680

• California Earned Income Tax Credit From the Franchise Tax Board for Tax Year 2015

• EIC Flyer Your money, Now Claim it! • Basic information for EITC and CTC • Number to call for more information

Download in 21 Languages http://eitcoutreach.org/category/outreach-tools

• Tax Preparer Tool Kit http://www.eitc.irs.gov/Tax-Preparer-Toolkit/main

Why Pay When You Can Get Your Taxes Done for Free? • Reasons to Go to a VITA Site - 800-906-9887 (locations and hours) • Guidelines for Choosing a Tax Preparer • What to Bring with You http://eitcoutreach.org/home/tax-credit-information/tax-credit-informationbasicsgetting-started/free-tax-filing- assistance-through-vita/

http://eitcoutreach.org/wp-content/uploads/2012/09/English-VITA-Check-List-2013.pdf http://eitcoutreach.org/wp-content/uploads/2012/09/Spanish-VITA-Check-List-2013.pdf

• Claiming Credits for Past Years Flyer Q& A: How to Claim Tax Credits for Back Years http://eitcoutreach.org/home/faq-factsheets/tax-filing-questions/how-to-claim-tax-credits-for-back-years/

• More stuffers, brochures and posters from the IRS http://www.eitc.irs.gov/Partner-Toolkit/main

• EITC Coalitions Find the local EITC coalitions that provide outreach and free tax preparation in your area. These are coalitions in existence as of August 2011 and will be updated semi-annually. http://www.cbpp.org/eitc-partnership/directory.htm

• It’s Your Money, Now Claim it! Kit is available on line and in hard copy. www.eitcoutreach.org

• Internal Revenue Service - EITC Home Page http://www.irs.gov/individuals/article/0,,id=96406,00.html

• The EITC Assistant The EITC Assistant helps calculate if a worker is eligible for the EITC and the amount in English and en Español for tax years 2013, 2012, 2011