TOOLKIT FOR EMPLOYERS
Earned Income Tax Credit (EITC)
WHAT EMPLOYERS AND EMPLOYEES NEED TO KNOW • WHO IS ELIGIBLE • PROMOTING EITC • RESOURCES FOR EMPLOYERS
Earned Income Tax Credit: What You Need To Know
The EITC provides greater economic security for working families, especially those with children. It has evolved into one of the federal government’s most critical antipoverty programs. The program has been lauded by both Democrats and Republicans.
President Reagan called it “the best anti-poverty, the best pro-family, the best job creation measure to come out of Congress.” President Biden’s American Rescue Plan expanded the EITC, and he has called on Congress to permanently extend it.
How Does The EITC Benefit Employers?
The Earned Income Tax Credit benefits employers and businesses by:
Encouraging employees to stay in the workforce
- Designed to encourage and reward participation in the labor market
- Entering the labor force means receiving earned income and a tax credit worth thousands of dollars
Effectively giving employees a raise at no additional cost to your business
- Employees get a tax break, effectively putting more money in their pockets
- Increases participation in the labor force with little to no effect on the number of hours worked
Helping grow your business’s bottom line
- Directly linked to lower rates of employee turnover
- Establish better relationships between employers, management, and employees
How Does The EITC Benefit Employees?
The Earned Income Tax Credit benefits employees by:
Increasing income for working families
- Put up to $6,728 back in people’s pockets, providing a lifeline for the expected and unexpected needs
- A minimum wage employee with two children can receive up to 40 percent more income
Helping reduce poverty
- Lifted more than 5 million people out of poverty in 2018, more than half of which were children
- Has kept more children above the poverty line than any other tax credit program
Improving health outcomes, especially for women and children
- Increase in income is linked to lower risk of chronic diseases such as heart disease or diabetes
- Access to health coverage, safe communities, good schools, and healthy food
Who is eligible for the EITC?
Employees are eligible for the ETIC if they meet these requirements:
Have worked and earned a maximum income of $57,414
(see chart below)
Have investment income below $10,000 for Tax Year 2021
Have a valid Social Security number by the due date of their 2021 tax return
Be a U.S. citizen or a resident alien all year
Not file Form 2555 (related to foreign earned income)
Additional special qualifying rules for military members, members of the clergy, and taxpayers with disabilities can be found here.
The EITC provides greater economic security for working families, especially those with children. It has evolved into one of the federal government’s most critical antipoverty programs.
