How employers can help workers claim EITC

Many business executives want to keep their employees happy, but there are few ways to do it that doesn’t cost them money. Well, here’s one: the Earned Income Tax Credit.

The Earned Income Tax Credit (EITC) is the government’s largest benefits program for working families. It was created in 1975 in part to offset the burden of Social Security taxes on low-wage employees and to provide an incentive to work.

Work is the key. People must have earned income in order to qualify. There also are income limits. For example, a couple must earn less than $39,783 if they have two or more children. The maximum credit ranges from $428 for a childless individual to $4,716 for families.

For low-wage workers, the tax refund – supplemented by EITC and other important tax breaks – often becomes the largest single check they will receive during the year.

But here’s the issue: one in four eligible workers fails to claim the EITC.

There are many reasons. Some workers’ income may be so low they have no tax filing requirement. They aren’t aware that, if they did file, they might qualify for this and other tax credits. Childless workers also are eligible – just for a lesser amount than families.

Non-English speakers, nontraditional families, Native Americans, rural families, and the disabled are all people who could possibly benefit from EITC but who are difficult to reach with information about the credit.

This is where business can play a critical role in spreading the word about these important benefits. But many times business does not know where to start. To meet the growing business need, each year Corporate Voices for Working Families produces an employer guide that provides companies with information and tips on how to provide workers with information about important tax credits and other public benefits.

Companies can learn now to use the Internet, internal corporate Web sites and educational seminars to disseminate this information and educate their employees about the benefits of EITC. In addition, the guide offers paycheck stuffers, fact sheets and break room posters that companies can brand with their own logo. (For more information or to access to the guide, you can visit cvworkingfamilies.org.)

Employers also should be aware of the professional and free help available to their workers. More than 70 percent of EITC claimants receive help preparing their tax returns, mostly by paid professionals. Low-income taxpayers who use paid preparers should seek out reputable professionals to ensure accurate returns.

Hundreds of organizations also partner with the IRS to operate volunteer tax preparation sites nationwide. Volunteers offer free tax preparation services helping taxpayers claim the credits and deductions for which they are eligible. For taxpayers who want to prepare their own return, there is Free File, which is available at IRS.gov. Free File offers several free options to EITC-eligible taxpayers.

Finally, the U.S. Department of Labor estimates that by the year 2012, 7.5 million new jobs will be created in the American economy; 6 million of those jobs will be low-wage. To help increase opportunities for employees and assist companies, it will take a commitment by the public and private sector working together. Together we make a real difference in the lives of working families.

Donna Klein is president and founder of Corporate Voices for Working Families and Margaret A. Roark, president and owner of M&D Consulting Inc., is the 2008 chair of the Internal Revenue Service Advisory Council.