Earned Income Credit (EIC) Notification Deadline: What Employers Need to Know

The deadline is approaching for employers to inform their employees about the Earned Income Credit (EIC) if they worked at any time during 2023, and income tax was not withheld from their wages. Action may be required by February 5, 2024. The IRS has issued a December 2023 version of Notice 1015 regarding EIC notifications. Under federal law, employers must inform applicable employees of the credit. Additionally, employers are encouraged to notify all employees whose wages for 2023 are less than $63,398 that they may be eligible for the EIC.

What is the Earned Income Credit (EIC)?

The Earned Income Credit (EIC) is refundable tax credit available to certain low- to moderate-income workers and families. This credit is intended to offset living expenses, along with Social Security taxes paid during the year. Eligible individuals/families can claim the credit on their personal income tax returns.

How Must I Notify My Employees About EIC?

• The IRS Form W-2, which has the required EIC information on the back of Copy B.
• A substitute Form W-2 with the same EIC information on the back of the employee’s copy that is on Copy B of the IRS Form W-2.
• Notice 797, Possible Federal Tax Refund Due to the Earned Income Credit (EIC).
• Your written statement with the same wording as Notice 797.

Employees who claimed exemption from withholding on Form W-4, Employee’s Withholding Certificate, do not need to be notified.

No further action is required by employers if Form W-2 is delivered to employees on time.

If you give an employee a substitute Form W-2, but it does not contain the required EIC information, you must notify the employee within one week of the date the substitute Form W-2 is given. If Form W-2 is required, but not delivered on time, you must give the employee Notice 797 (or a written statement with the same information) by the date Form W-2 is required. If Form W-2 is not required, you must notify the employee by February 5, 2024.

Notice 797 must be handed directly to the employee or delivered to the employee by first-class mail to the employee’s last known address. EIC Notification requirements will not be met by posting Notice 797 on an employee bulletin board or by sending it through office mail. However, you may want to post the to make all employees aware that they may be eligible for the EIC.

IRS EIC Notification Requirements by State

Currently, eight states require employers to notify eligible employees about the federal EIC:

• California – Employers must notify all employees about the EIC by the week after employees receive Forms W-2 if they are subject to or required to provide California unemployment insurance.
• Colorado – Employers must provide a written notice of the availability of federal and state EIC and federal and state child tax credits at least once per year.
• Illinois – Employers must notify all employees about the EIC by the week after employees receive Forms W-2 if they are subject to or required to provide Illinois unemployment insurance if the employee received less than $56,838 ($63,398 if married filing jointly) in gross wages in 2023.
• Louisiana – Employers with more than twenty employees must post a written notice written by the Louisiana Department of Labor on the EIC. Additionally, new employees must be notified if their anticipated annual wages are less than the state determined threshold.
• Maryland – Employers must notify eligible employees of the federal and state EIC by December 31. The notice can be written or electronic.
• New Jersey – Employers must provide eligible employees with a written notice about the availability of the New Jersey and federal EIC using a statement provided by the New Jersey State Treasurer between January 1 and February 15 when the employer distributes Forms W-2.
• Oregon – Employers must notify eligible employees about the federal and state EIC when Form W-2’s is sent. Additionally, EIC information is required to be included in any poster about the Oregon minimum wage rate.
• Texas – Employers must notify employees of the EIC by March 1 of each year.
• Virginia – Employers are required to post an EIC notice in the same location as other mandated state and federal notices.

The City of Philadelphia, PA requires all employers to provide notice about the EIC at the same time as the Form W-2, Form 1099, or other wage statements.

Conclusion

If you have any questions or concerns regarding the Earned Income Credit (EIC) Notification Deadline and how to inform employees, please reach out to your Herbein team member through the form below.

Article contributed by Mason Rice