Provides that employers shall notify employees of potential state and federal earned income tax credits and delineates the contents, timing and manner of providing notice as well as options available to the employer.
TITLE OF BILL: An act to amend the tax law, in relation to requiring employers to provide notice of potential eligibility for federal and New York state earned income tax credits
PURPOSE: This bill would require employers to notify employees that they may be eligible for a State or federal Earned Income Tax Credit (EITC).
SUMMARY OF PROVISIONS:
Section 1 of the bill would amend Tax Law § 606(d) (6) to provide that: (1) employers with persons in their employ in New York State for whom they must furnish an annual wage summary must furnish to each such employee a notice that he or she may be eligible for a State or federal EITC; (2) the Department of Taxation and Finance shall promulgate guidance specifying the minimum requirements of such notice; (3) such notice must be furnished with, or within one week before or after, the annual wage summary; (4) such notice may be provided by hand delivery, electronic or regular mail; and (5) the employer may choose to provide notice only to those employees whose gross incomes do not equal or exceed $60,000, or the maximum income at which an employee may be eligible for the EITC, whichever is higher.
Section 2 of the bill would provide for an effective date of January 1, 2015.
EXISTING LAW: 26 V.S.C. § 32 authorizes a federal EITC for eligible individuals and sets forth the amount of the credit.
Tax Law § 606(d) authorizes a State EITC for individuals who are eligible for a federal EITC pursuant to 26 V.S.0 § 32, and provides that the State EITC will be calculated at 30% of the federal EITC.
Tax Law § 606(d) 46) provides that the Commissioner of the Department of Taxation and Finance must make efforts at least every three years to notify individuals of their potential eligibility for an EITC.
JUSTIFICATION: The federal EITC, enacted in 1975, is a refundable federal income tax credit for low to moderate income working individuals and families. The federal EITC was enacted in part to offset the burden of social security taxes and to provide an incentive to work. The EITC can result in a reduction of taxes owed, and when it exceeds the amount of taxes owed, it results in a tax refund to those who claim and qualify for the credit. New York State enacted a companion EITC in 1994, which is available to individuals who qualify for the federal BITC and provides them with a State tax credit equal to 30 percent of the applicable federal EITC.
Maximum credits range from $569 for an individual with no children to as much as $6,217 for a married couple with two or more children. The EITC is one of the most effective tools in helping people escape poverty and transition from public assistance. For example, an individual working full-time at $8.50 per hour and earning $17,000 per year could effectively realize more than a 25 percent increase in income, or an effective hourly rate of $11.39, after receipt of the state and federal EITC. The EITC, when coupled with other supports available to low-income families, such food stamps and the low income home energy assistance program, can lift them out of poverty and off of public assistance.
Despite the effectiveness of this tool, it is estimated that as many as 20 percent of those eligible do not claim the credit. To qualify, taxpayers must meet certain requirements and file a tax return, even if they did not earn enough money to be obligated to file a return. This bill aims to ensure that all New York State taxpayers who are potentially eligible are informed of the EITC at or near the time that the annual wage statement is provided.
This bill also aims to give employers as much flexibility as possible in the content, form, and breadth of distribution. For administrative ease, many employers will choose to provide notice to all taxpayers; however, employers will have the option of providing notice only to those individuals whose gross annual incomes do not exceed $60,000 or the maximum income at which an employee may be eligible for an EITC, whichever is higher. In addition, employers will have the option of providing notice by hand delivery, regular mail or electronically.
LEGISLATIVE HISTORY: 2011-2012: S.366-A - Died in Committee
FISCAL IMPLICATIONS: There are no significant fiscal impacts associated with this proposal.
EFFECTIVE DATE: This bill would take effect January 1, 2015.
STATE OF NEW YORK ________________________________________________________________________ 1375 2013-2014 Regular Sessions IN SENATE (PREFILED) January 9, 2013 ___________Introduced by Sens. MONTGOMERY, SQUADRON -- read twice and ordered printed, and when printed to be committed to the Committee on Investi- gations and Government Operations AN ACT to amend the tax law, in relation to requiring employers to provide notice of potential eligibility for federal and New York state earned income tax credits THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. Paragraph 6 of subsection (d) of section 606 of the tax law, as amended by section 3 of part V of chapter 60 of the laws of 2004, is amended to read as follows: (6) Notification. (I) The commissioner shall periodically, but not less than every three years, make efforts to alert taxpayers that may be currently eligible to receive the credit provided under this subsection, and the credit provided under any local law enacted pursuant to subsection (f) of section thirteen hundred ten of this chapter, as to their potential eligibility. In making the determination of whether a taxpayer may be eligible for such credit, the commissioner shall use such data as may be appropriate and available, including, but not limit- ed to, data available from the United States Department of Treasury, Internal Revenue Service and New York state income tax returns for preceding tax years. (II) EXCEPT AS SET FORTH IN CLAUSE (D) OF THIS SUBPARAGRAPH, EMPLOYERS WITH PERSONS IN THEIR EMPLOY IN NEW YORK STATE FOR WHOM THEY MUST PROVIDE AN ANNUAL WAGE SUMMARY SHALL EACH YEAR FURNISH TO EACH SUCH PERSON A NOTICE THAT HE OR SHE MAY BE ELIGIBLE FOR A STATE EARNED INCOME TAX CREDIT PURSUANT TO THIS SUBSECTION AND A FEDERAL EARNED INCOME TAX CREDIT PURSUANT TO SECTION THIRTY-TWO OF THE INTERNAL REVENUE CODE. FOR PURPOSES OF THIS SUBPARAGRAPH, EMPLOYER SHALL HAVE THE SAME MEANING ASEXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD03096-01-3 S. 1375 2
SET FORTH IN SUBSECTION (A) OF SECTION THREE THOUSAND THREE HUNDRED SIX OF THE INTERNAL REVENUE CODE. (A) CONTENTS OF NOTICE. THE NEW YORK STATE DEPARTMENT OF TAXATION AND FINANCE SHALL PROMULGATE GUIDANCE AS NECESSARY SPECIFYING THE MINIMUM REQUIREMENTS OF SUCH NOTICE, WHICH WILL INCLUDE, BUT NOT BE LIMITED TO, INFORMATION AS TO THE AVAILABILITY OF AND POTENTIAL ELIGIBILITY FOR THE FEDERAL EARNED INCOME TAX CREDIT AND THE NEW YORK STATE EARNED INCOME TAX CREDIT. SUCH NOTICE SHALL REFER PERSONS TO BOTH THE INTERNAL REVENUE SERVICE AND THE NEW YORK STATE DEPARTMENT OF TAXATION AND FINANCE BY TELEPHONE AND THROUGH THEIR WEBSITES FOR INFORMATION REGARDING ANNUAL ELIGIBILITY THRESHOLDS BY HOUSEHOLD TYPE, FILING REQUIREMENTS, AND HOW TO OBTAIN NECESSARY FORMS AND INSTRUCTIONS. (B) TIMING OF NOTICE. THE EMPLOYER SHALL PROVIDE THE NOTICE REQUIRED BY THIS SUBPARAGRAPH WITHIN ONE WEEK BEFORE OR AFTER, OR AT THE SAME TIME, THE EMPLOYER PROVIDES THE ANNUAL WAGE SUMMARY, INCLUDING BUT NOT LIMITED TO, A FORM W-2 OR A FORM 1099. THE NOTICE SHALL BE PROVIDED EITHER SEPARATELY OR AS PART OF THE ANNUAL WAGE SUMMARY. (C) MANNER OF PROVIDING NOTICE. THE EMPLOYER SHALL PROVIDE THE NOTICE REQUIRED BY THIS SUBPARAGRAPH TO EACH PERSON BY HAND DELIVERY, OR ELEC- TRONIC MAIL, OR BY MAIL TO THE LAST KNOWN ADDRESS. (D) EMPLOYER'S OPTION. AT THE EMPLOYER'S OPTION, THE EMPLOYER MAY CHOOSE TO PROVIDE THE NOTICE REQUIRED PURSUANT TO THIS SUBPARAGRAPH ONLY TO THOSE EMPLOYEES WHOSE GROSS ANNUAL INCOMES DO NOT EQUAL OR EXCEED SIXTY THOUSAND DOLLARS OR THE MAXIMUM INCOME AT WHICH AN EMPLOYEE MAY BE ELIGIBLE FOR THE EARNED INCOME TAX CREDIT, WHICHEVER IS HIGHER. S 2. This act shall take effect January 1, 2015.