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Bridging the Gap Webinar Series, December 2011 Hillary Lazar, Program Director, NHSA

Bridging the Gap Webinar Series, December 2011 Hillary Lazar, Program Director, NHSA. MONEY THAT MATTERS The 101's of Connecting Working Families with Tax Credits. Understanding the Basics:. Refundable Tax Credits. Refundable Tax Credits: What are they?. Non-refundable Taxes:

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Bridging the Gap Webinar Series, December 2011 Hillary Lazar, Program Director, NHSA

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  1. Bridging the Gap Webinar Series, December 2011 Hillary Lazar, Program Director, NHSA MONEY THAT MATTERS The 101's of Connecting Working Families with Tax Credits

  2. Understanding the Basics: Refundable Tax Credits

  3. 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

  4. 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

  5. Refundable Tax Credits: What are they? Non-Refundable Tax Credit Income Taxes Owed Remaining Tax Credit $1,000 - $400 = $600

  6. Refundable Tax Credits: What are they? Refundable Tax Credit Income Taxes Owed Remaining Tax Credit $1,000 - $400 = $600

  7. Refundable Tax Credits: Why are they important? Three Reasons for Refundable Credits: • 1. Offset income and payroll taxes • 2. Supplement wages • 3. Provide a work incentive

  8. Refundable Tax Credits: How do workers use the credits? Child Care Rent & Utilities Transportation Basic Needs Medical Expenses The credits help workers keep working and care for themselves and their children.

  9. Refundable Tax Credits: Which credits are refundable? • Two Major “Refundable” Tax Credits: • 1. The Earned Income Tax Credit • 2. The Additional Child Tax Credit

  10. The Earned Income Tax Credit

  11. The Earned Income Tax Credit: What is it? • Largest Refundable tax credit • For low to moderate-income working families • For low-income individuals

  12. The Earned Income Tax Credit: Why is it important? The EIC Lifts More than 9 Million Above the Poverty Line. 2009

  13. The Earned Income Tax Credit: Why is it important? • $8/hour job • $16,000 annual Boosts Workers’ Income: = $10+/hour job = $19,000+ annual

  14. The Earned Income Tax Credit: How much is it worth? For 2011: • Income limits for married workers are $5,080 higher than these amounts. • Workers not raising children must be between the ages of 25 and 64. • Investment income cannot exceed $3,150.

  15. The Earned Income Tax Credit: How much is it worth?

  16. The Earned Income Tax Credit: Other Criteria • Each child claimed must count as a “qualifying child” • Immigrant applicants must be legally authorized to work

  17. The Additional Child Tax Credit (and other credits for working families)

  18. The Additional and Child Tax Credits: What are they? • CTC: Non-refundable tax credit • ACTC: Refundable tax credit (for workers who don’t owe taxes) • For low and moderate-income families • For families with children

  19. 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

  20. 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

  21. 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

  22. 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

  23. The Making Work Pay Credit • Bonus for workers in 2010 (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

  24. 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 a few states the credit is refundable

  25. Claiming the Credits

  26. Claiming the Credits: Means Filing Taxes! • Employees mustfile a tax return! • Form 1040 or Form 1040A – not 1040EZ for workers with children • 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

  27. Claiming the Credits: Means Filing Taxes! • A copy of 2010 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 2011 • Proof of other income and expenses • Social Security Numbers for worker, spouse and any children born before 12/31/11 – for the EITC • Individual Taxpayer Identification Numbers (ITINs) documentation – for the CTC

  28. Claiming the Credits: Avoid Commercial Tax Preparers EITC Claimants • Average fees range from $85 - $120 for e-filing.

  29. 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

  30. 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

  31. Claiming the Credits: From Credit To Savings • Use Direct Deposit and Split refund to start saving money Outreach info and materials: www.splitrefund.net

  32. Claiming the Credits: From Credit To Savings • Promote the EIC and CTC with asset development programs: • - Bank Accounts • - Individual Development Accounts (IDAs) • - Car Ownership Programs • - Homeownership Programs • Connect taxpayers to financial resources: • - Financial Education Classes • - Credit Reports and Credit Repair • Other Earned Benefits – SNAP, WIC, Medicaid, CHIP, LIHEAP, Child Care Subsidies

  33. Tax Credit Outreach for Employers and Providers

  34. Tax Credit Outreach: Why Bother? EIC Eligible Workers 20 - 25% Do Not Claim EIC 75 – 80% Claim EIC = $10 billion

  35. Tax Credit Outreach: Why Bother?

  36. Tax Credit Outreach: You Don’t Have to be an Expert Youdo NOT have to be a tax expert to help families claim their credits. • Raise Awareness 2.Connect them with the Experts and Enrollment Specialists 3. Incorporate outreach into your regular routine/increase outreach

  37. Tax Credit Outreach: First Steps Self-Assessment: • What outreach works best for you and your organization? • Who do you want to connect w/ tax credits • What’s your role • Existing programs • Communication • Special Considerations

  38. For Employers/HR: How to 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

  39. For Providers: How to Raise Awareness • Mail out info • Put up posters throughout the site • Talk about tax credits and refer clients to VITA sites in one-on-one sessions • Piggyback on existing programs • Bring in a VITA volunteer counselor • for an information or enrollment session • Become a VITA site or join a community outreach campaign

  40. For Employers and Providers: How to raise awareness 7 is the MAGIC number.

  41. For Coalition-builders: How to Raise Awareness Distribute tax credit info and direct workers to free tax filing sites Conduct outreach events and create opportunities to file returns Get in position to enrich and sustain outreach efforts in the future Expand and improve free tax filing sites Engage others in reaching out through their own networks

  42. For Coalition-builders: How to Raise Awareness PARTNERSHIPS

  43. Tax Credit 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.

  44. Tax Credit Outreach: Use Existing Resources • Contact the IRS to locate a VITA Site: 1-800-906-9887 • Access EITC toolkits and resources online http://www.nationalassembly.org/FSPC/BridgingTheGap/EarnedBenefits.aspx http://eitcoutreach.org/

  45. LEARN MORE! For more information about tax credit outreach or the Bridging the Gap Initiative please contact: Hillary Lazar, Program Director – NHSA 202-347-2080 x15 • Ph 202-393-4517 Fax hlazar@nassembly.org

  46. POLL QUESTION: • How much do you know about the Earned Income Tax Credit? • A lot • Some • A little • Nothing • Unsure

  47. 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

  48. POLL QUESTION: • True or False: Children in immigrant families do not qualify for the Child Tax Credit. • True • False • Unsure

  49. POLL QUESTION: • How much do you know about the Child Tax Credit? • A lot • Some • A little • Nothing • Unsure

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