Earned Income Credit (EIC)

The Earned Income Credit (EIC), also known as the Earned Income Tax Credit (EITC), is a tax benefit offered by the IRS to support low- to moderate-income workers, particularly families with children. Eligible individuals can reduce their tax liability or receive a refund based on their income, filing status, and number of qualifying dependents.

Employers play a key role in raising awareness about this credit. According to the IRS, businesses must notify employees who may qualify for the EIC by providing IRS Notice 797 or including the information in Form W-2, Notice 1015. Payroll service providers like ADP and Gusto emphasize that non-compliance with employer notice requirements may result in penalties and missed opportunities for employees to access valuable financial support.

Eligibility factors include

• Adjusted gross income within IRS-set thresholds
• Employment income from wages or self-employment
• Valid Social Security number and residency requirements
• Correct filing status (married filing separately generally not eligible)

The credit amount varies depending on income, family size, and other qualifying conditions. For employees, the EIC can represent thousands of dollars in financial relief. For employers, ensuring compliance not only avoids penalties but also builds trust and goodwill with the workforce.