Bridging the Gap Webinar Series, March 2010Hillary Lazar, Benefits Outreach Coordinator, NHSA

MONEY THAT MATTERSDoing Tax Credit Outreach in the Workplace

Understanding the Basics: Refundable Tax Credits

Refundable Tax Credits: What are they?

Non-refundable Taxes: • Reduces or eliminates taxes owed• No money back

Refundable Taxes: • Reduces or eliminates taxes owed• Leftover money back in cash refund

Refundable Tax Credits: What are they?

Tax credit received:

Taxes owed:

Cash I get back with a non-refundable credit:

Cash I get back with a refundable credit:

$400

$1000

$0

$600

For example:

Refundable Tax Credits: What are they?

Income Taxes Owed

Remaining Tax Credit

- $400

$1,000 = $600

Non-Refundable Tax Credit

Refundable Tax Credits: What are they?

Refundable Tax Credit

Income Taxes Owed

Remaining Tax Credit

- $400

$1,000 = $600

Refundable Tax Credits: What are they important?

Three Reasons for Refundable Credits:

1. Offset income and payroll taxes

2. Supplement wages

3. Provide a work incentive

Refundable Tax Credits: Which credits are refundable?

Two Major “Refundable” Tax Credits:

1. The Earned Income Tax Credit

2. The Additional Child Tax Credit

The Earned Income Tax

Credit

The Earned Income Tax Credit: What is it?

• Largest Refundable tax credit

• For low to moderate-income working families

• For low-income individuals

The Earned Income Tax Credit: Why is it important?

The EIC Lifts More than 5 Million Above the Poverty Line.

2.6 Million Children

2.5 Million Adults

The Earned Income Tax Credit: Why is it important?

Boosts Workers’ Income:

• $8/hour job

• $16,000 annual

= $10+/hour job

= $21,000+ annual

The Earned Income Tax Credit: How much is it worth?

For 2008:Number of children:

Income less than:

EIC up to:

3 or more children $43,279 $5,657

2 children $40,295 $5,028

1 child $35,463 $3,043

No children $13,440 $457

Income limits for married workers are $5,000 higher than these amounts.

Investment income cannot exceed $3,100.

$48,279

$45,295

$40,463

$18,440

The Earned Income Tax Credit: How much is it worth?

The Earned Income Tax Credit: Other Criteria

Each child claimed must count as a “qualifying child”

Immigrant applicants must be legally authorized to work

The Earned Income Tax Credit: Other InformationOther Information

EIC Does Not Count as Income State Rules Control

SNAP (food stamps) TANF (cash assistance)

Medicaid Child Care subsidy

Public Housing Energy Assistance

Head Start CHIP (no state counts)

SSI

Veteran’s Benefits

The AdditionalChild Tax Credit

(and other credits for working families)

The Additional and Child Tax Credits: What are they?

• CTC: Non-refundable tax credit

• ACTC: Refundable tax credit

• For low and moderate-income families

• For families with children

The Child Tax Credit: How much is it worth?

For families with annual income under:

• $110,000 for married couples

• $75,000 for single or head of household

• $55,000 married filing separately

$1000 for every “qualifying child”

The Child Tax Credit:Other Criteria

Filers must have children

Each child claimed must count as a “qualifying child”

Immigrant applicants and children musthave a valid ITIN

The Additional Child Tax Credit: Other Information

What it is worth:

Amount of credit leftover from the CTC

OR15% of taxable income after $3,000

Must have more than $3000 in taxable income

The (Additional) Child Tax Credit: Other information

CTC Does Not Count as Income

Federal Programs State-run Programs

SNAP (food stamps) TANF

Medicaid Child Care subsidy

Public Housing Energy Assistance

Head Start CHIP

SSI

Veteran’s Benefits

The American Opportunity Tax Credit (formerly HOPE)

• Helps pay for college tuition and education-related expenses

• Worth up to $2,500

• Partially refundable

• Up to $1,000 can be claimed even if no income tax is owed

The Making Work Pay Credit

• Bonus for workers in 2009 (ARRA)

• Most receive credit automatically in paycheck

• Up to $400 for most ($800 for married couples filing jointly)

• Income limits are $75,000 (single) and $150,000

• Helps cover child care or caregiver expenses

• Maximum expenses that can be claimed:– $3,000 for one dependent, $6,000 for two or more

• Credit amount = 20 - 35% of expenses – depending on income

• In 12 states the credit is refundable

Child and Dependent Care Credit

Claiming the Credits

Claiming the Credits: Means Filing Taxes!

Employees must file a tax return!– Form 1040 or Form 1040A – not 1040EZ – EIC - Schedule EIC – CTC - Form 8812– For CDCC – Form 2441– For AOTC – Form 8863– For MWPC – Schedule M

Workers not raising children can file any form

Eligible workers can claim EIC and CTC refunds for up to 3 previous years.

Claiming the Credits: Means Filing Taxes!

A copy of 2008 tax return

W-2 forms from all jobs. If you don’t have the W-2, bring final pay stubs, if available

1099 forms for any other income Any IRS notices received during 2009

Proof of other income and expenses

Social Security Numbers for worker, spouse and any children born before 12/31/09 – for the EITC

Individual Taxpayer Identification Numbers (ITINs) documentation – for the CTC

Claiming the Credits: Avoid Commercial Tax Preparers

70% Use CommercialTax Preparers

30% Self-Prepareor Use Free Filing Programs

EITC Claimants

Average fees range from $85 - $120 for e-filing.

Claiming the Credits: Avoid Refund Anticipation Loans

• High-interest loans – can be over 180 percent

• Processing fee – can be $80 or more

No guarantee refund will equal the loan amount.

Claiming the Credits: Free Tax Preparation services

• Volunteer Income Tax Assistance (VITA) - Free preparation for low-income workers

- Sites across the country - Volunteers trained under IRS guidance- Taxpayers can receive refund in 7-12 days through e-filing

• Online Calculators

Claiming the Credits: From Credit To Savings

• Use Direct Deposit and Split refund to start saving moneyOutreach info and materials: www.splitrefund.net

• File a W-5 for the advance EITC

Tax Credit Outreach in

the Workplace

Workplace Outreach: Why Bother?

75 – 80% Claim EIC 20 - 25% Do Not Claim EIC

EIC Eligible Workers

= $8 billion

Workplace Outreach: Why Bother?

Workplace Outreach: You Don’t Have to be an Expert

You do NOT have to be a tax expert to help families claim their credits. You have two jobs:

1. Raise Awareness

2. Connect them with the Experts and Enrollment Specialists

Workplace Outreach:First Steps

What outreach works best for your organization?

• Communication methods• Existing programs• What worked in the past• Special Considerations

Self-Assessment:

Workplace Outreach:Raise Awareness Include fliers with paychecks/stubs or when

distributing W-2s

Put up posters in the break room or bathrooms

Talk about credits during staff meetings

Offer to do one-on-one conversations about taxes and/or finances

Bring in a VITA volunteer counselor for an information or enrollment session

Workplace Outreach: How to Talk About Tax Credits Talking points to emphasize:

It’s for working families

They earned it – they should get it!

The financial crisis

It’s a simple process

Use Language That’s Empowering.

Workplace Outreach:Use Existing Resources

• Contact a VITA Site: 1-800-906-9887• Download EITC toolkits and

resources

• Access information online

http://www.nationalassembly.org/FSPC/BridgingTheGap/EarnedBenefits.aspx

http://www.irs.gov/app/understandingTaxes/student/tax_tutorials.jsp

For more information about tax credit outreach or the Bridging the Gap Initiative please contact:

Hillary Lazar, Benefits Outreach Coordinator – NHSA202-347-2080 x10 • Ph 202-393-4517 Fax

hlazar@nassembly.org

LEARN MORE!

POLL QUESTION:

How much do you know about the Earned Income Tax Credit?

A lot Some A little Nothing Unsure

POLL QUESTION:

How much can the Earned Income Tax Credit be in cash back?

More than $5000 Up to $5000 Up to $2500 Up to $1500 Don’t know

POLL QUESTION 6:

True or False: Children in immigrant families do not qualify for the Child Tax Credit.

True False Unsure

POLL QUESTION:

How much do you know about the Child Tax Credit?

A lot Some A little Nothing Unsure

POLL QUESTION:

Which of the following tax credits have you heard of?

The American Opportunity Tax Credit The HOPE Credit The Child and Dependent Care Credit The Making Work Pay Credit

POLL QUESTION:

Do you any concerns about doing outreach?

Not enough time – I’m busy enough as is Money is a sensitive/private topic Outreach means adding to the organization’s budget I’ve done outreach – nothing works All of the above I don’t have concerns

POLL QUESTION:

Why is tax credit outreach important? In other words, what brings you here today?

Want to offer more financial support to our workers Not enough working families know about them Times are tough for everyone, every penny helps All of the above Not exactly sure (ie. my boss asked me to sign up . . .)

POLL QUESTION:

Have you heard of VITA sites?

Yes No Unsure

Pop Quiz!

1.Which of the following statements are true? The Earned Income Tax Credit and Additional Child Tax Credit are two of the major refundable credits out there. T

The Earned Income Tax Credit can be as much as $5657. T

A qualifying child for the Child Tax Credit is under 19 years old. F

The American Opportunity Tax Credit helps to cover college tuition and education expenses. T

VITA sites charge a small processing fee for tax prep. F

POLL QUESTION:

Will you try at least one outreach technique this tax season?

Yes No Maybe