Some of your organization’s employees may be eligible for a larger tax refund without knowing it. You can do them a huge favor (and earn some good will) by introducing them to those tax savings.
Specifically, many eligible people fail to take the Earned Income Tax Credit (EITC), a refundable tax credit for low-income employees. Do more than direct them to the IRS Web site that shows them whether they qualify (www.irs.gov, click on “Qualify for EITC?” in left column).
One way: Bring in a CPA to give workers a quick briefing on the EITC. (You can probably attract one for free … it’ll help the CPA gain clients.)
Or do it yourself. Help employees with the paperwork and then boost their upcoming paychecks by an amount equal to the EITC refund they expect to qualify for this year. Five steps to follow:
- Tell employees about the advance Earned Income Tax Credit, which allows taxpayers who expect to qualify for EITC in 2007 and have at least one qualifying child to receive part of the credit in each paycheck. Mention it at staff meetings, post educational materials in the workplace and include W-5 forms in hiring and benefits packages for employee orientation.
- Eligible employees should complete and sign their W-5 forms and return them to you.
- Employers include advance EITC payments in employee paychecks. The amount is based on a percentage of the employee’s salary.
- Most employment tax software automatically includes advance EITC payments for eligible employees. If yours doesn’t, you can find the amount to be paid in IRS Publication 15, available at www.irs.gov.
- Employees must re-apply for the advance EITC every calendar year that they wish to receive it. The 2007 W-5 form can be downloaded from www.irs.gov.