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? Tax credit received: Taxes owed: Cash I get back with a non-refundable credit: Cash I get back with a refundable credit: $400 $1000 $0 $600 For example:

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

6. Refundable Tax Credits: What are they? Refundable Tax Credit Income Taxes Owed Remaining Tax Credit - $400 $1,000 = $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? Medical Expenses TransportationRent & Utilities Basic Needs Child Care 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? Boosts Workers’ Income: $8/hour job $16,000 annual = $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. Number of children: Income less than: EIC up to: 3 or more children$43,998$5,751 2 children$40,964$5,112 1 child$36,052$3,094 No children$13,660$464

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? For families with annual income under: $110,000 for married couples $75,000 for single or head of household $55,000 married filing separately $1000 for every “qualifying child”

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 What it is worth: Amount of credit leftover from the CTC OR 15% of taxable income after $3,000 Must have more than $3000 in taxable income

22. The American Opportunity Tax Credit (formerly HOPE) Helps pay for college tuition and education-related expenses Worth up to $2,500 Partially refundable Up to $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 Up to $400 for most ($800 for married couples filing jointly) Income limits are $75,000 (single) and $150,000

24. 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 Child and Dependent Care Credit

25. Claiming the Credits

26. Claiming the Credits: Means Filing Taxes! Employees must file 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 High-interest loans – can be over 180 percent Processing fee – can be $80 or more No guarantee refund will equal the loan amount.

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.netwww.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? 75 – 80% Claim EIC 20 - 25% Do Not Claim EIC EIC Eligible Workers = $10 billion

35. Tax Credit Outreach: Why Bother?

36. Tax Credit Outreach: You Don’t Have to be an Expert You do NOT have to be a tax expert to help families claim their credits. 1.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 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 Self-Assessment:

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 Engage others in reaching out through their own networks Expand and improve free tax filing sites

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/BridgingT heGap/EarnedBenefits.aspx http://eitcoutreach.org/

45. 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 LEARN MORE!

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

48. 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

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

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

51. POLL QUESTION: Which of the following tax credits have you heard of?  The American Opportunity Tax Credit  The HOPE Credit  The Child and Dependent Care Credit  The Making Work Pay Credit

52. POLL QUESTION: Why are you interested in promoting tax credits?  I’m a service provider and want to connect my clients  My organization is hoping to get more involved with EITC outreach  I’m an HR or employee relations specialist and want to connect my employees  Times are tough and I have people in my life or community who I think may qualify  Other  Not sure (ie. my boss asked me to do it)

53. POLL QUESTION: Have you heard of VITA sites?  Yes  No  Unsure

54. Pop Quiz! 1.Pop Quiz - Which of the following statements are true?  The Earned Income Tax Credit and Additional Child Tax Credit are two of the major refundable credits out there. T  The Earned Income Tax Credit can be as much as $5666. T  A qualifying child for the Child Tax Credit is under 19 years old. F  The American Opportunity Tax Credit helps to cover college tuition and education expenses. T  VITA sites charge a small processing fee for tax prep. F

55. POLL QUESTION: Will you try at least one outreach technique this tax season?  Yes  No  Maybe