Employers would be required to notify employees of their potential eligibility for the federal Earned Income Tax Credit (EITC), under recently proposed legislation.
Introduced in 1975, the EITC was created "to offset the adverse effects of Social Security and Medicare payroll taxes on working poor families and to encourage low-income workers to seek employment rather than welfare," according to the text of HR 6371, the Earned Income Credit Information Act of 2008, sponsored by Rep. Rahm Emanuel (D-Illinois).
Officials estimate that nearly 25 percent of individuals who are eligible for the tax credit do not claim it. Emanuel's bill, along with a companion Senate bill (SB 3190), seeks to raise awareness of the credit by requiring employers to notify workers about their potential EITC eligibility when providing Forms W-2 to them. Employers with 25 or less employees would be exempt.
Modeled on a California bill enacted last October, the bipartisan federal legislation has the support of several organizations and large employers, including Wal-Mart, Northwestern University, CVS Corporation, and Cintas Corporation, that plan to voluntarily follow the provisions of HR 6371 before the next tax filing season.