Bridging the Gap Webinar Series, March 2010 Hillary Lazar, Benefits Outreach Coordinator, NHSA MONEY THAT MATTERS Doing 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? For example: $400 Taxes owed: $1000 Tax credit received: Cash I get back with a non-refundable credit: $0 Cash I get back with a refundable credit: $600
Refundable Tax Credits: What are they? Income Taxes Owed Remaining Tax Credit Non-Refundable Tax Credit $1,000 - $400 = $600
Refundable Tax Credits: What are they? Refundable Tax Credit Income Taxes Owed Remaining Tax Credit $1,000 - $400 = $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: 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.
The Earned Income Tax Credit: Why is it important? • $8/hour job • $16,000 annual Boosts Workers’ Income: = $10+/hour job = $21,000+ annual
The Earned Income Tax Credit: How much is it worth? For 2008: $48,279 $45,295 $40,463 $18,440 • Income limits for married workers are $5,000 higher than these amounts. • Investment income cannot exceed $3,100.
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 Information Other Information
The Additional Child 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? $1000 for every “qualifying child” For families with annual income under: • $110,000 for married couples • $75,000 for single or head of household • $55,000 married filing separately
The Child Tax Credit: Other Criteria • Filers must have children • Each child claimed must count as a “qualifying child” • Immigrant applicants and children must • have a valid ITIN
The Additional Child Tax Credit: Other Information • Must have more than $3000 in taxable income • What it is worth: • Amount of credit leftover from the CTC • OR • 15% of taxable income after $3,000
The American Opportunity Tax Credit (formerly HOPE) • Helps pay for college tuition and education-related expenses • Worth up to $2,500 • Partially refundable • Upto $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 • Upto $400 for most ($800 for married couples filing jointly) • Income limits are $75,000 (single) and $150,000
Child and Dependent Care Credit • 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
Claiming the Credits
Claiming the Credits: Means Filing Taxes! • Employees mustfile 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 EITC Claimants • Average fees range from $85 - $120 for e-filing.
Claiming the Credits: Avoid Refund Anticipation Loans • No guarantee refund will equal the loan amount. • High-interest loans – can be over 180 percent • Processing fee – can be $80 or more
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 money Outreach info and materials: www.splitrefund.net • File a W-5 for the advance EITC
Workplace Outreach: Why Bother? EIC Eligible Workers 20 - 25% Do Not Claim EIC 75 – 80% Claim EIC = $8 billion
Workplace Outreach: Why Bother?
Workplace Outreach: You Don’t Have to be an Expert Youdo NOT have to be a tax expert to help families claim their credits. You have two jobs: • Raise Awareness 2.Connect them with the Experts and Enrollment Specialists
Workplace Outreach: First Steps Self-Assessment: • What outreach works best for your organization? • Communication methods • Existing programs • What worked in the past • Special Considerations
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
LEARN MORE! For more information about tax credit outreach or the Bridging the Gap Initiative please contact: Hillary Lazar, Benefits Outreach Coordinator – NHSA 202-347-2080 x10 • Ph 202-393-4517 Fax email@example.com
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