California Earned Income Tax Credit (Cal EITC)
California began offering its own Earned Income Tax Credit (Cal EITC) starting with calendar year 2015 tax returns. This is a new refundable tax credit that puts money back in the pockets of California’s working families and individuals.
If you owe taxes, the Cal EITC reduces the amount of taxes you might owe and may allow you a refund when you file your taxes. If you do not owe taxes, the Cal EITC tax credit will provide you with a tax refund when you file your taxes.
If you have yet to file your 2015 state return and think you may qualify for Cal EITC, there is still time to file. While the deadline to file was April 18, 2016, all taxpayers receive an automatic extension to file until October 17, 2016. Free help is also available at free tax return prep sites around the state. Find a location near you at CalEITC4Me.org.
If you already filed your 2015 state return and think you may qualify for Cal EITC, you may amend your return. Consider contacting your professional tax preparer, or follow these instructions to fill out a Form 540X and Form 3514 to claim the credit.
|Number of Qualifying Children||CA Maximum Income||Cal EITC (up to)||IRS EITC (up to)|
|3 or more||$13,870||$2,653||$6,242|
This credit is available to California households with adjusted gross incomes of less than $6,580 if there are no qualifying children, less than $9,880 if there is one qualifying child, or less than $13,870 if there are two or more qualifying children.
You qualify for Cal EITC if:
- You have wages and adjusted gross income within certain limits, AND
- You, your spouse, and any qualifying children each have a social security number issued by the Social Security Administration that is valid for employment, AND
- You do not use the “married/RDP filing separately” filing status, AND
- You lived in California for more than half the tax year.
|Earned Income||Eligible sources of earned income from:
|Maximum Income Limit||Both your adjusted gross income and earned income (defined above) must be no more than:
|Filing Status||You may file as:
|Qualifying Child||Your qualifying child must meet 3 criteria:
The child only qualifies for one return. If the child can be claimed by more than one taxpayer, the child’s qualification goes to:
|Residency||Your principal residence must be in California for more than half the tax year.|
|Age||If you do not have a qualifying child, you (or your spouse if you file a joint return) must be between 25 and 65 years old at the end of the tax year.|
There are a few options:
- No cost: Trained community volunteers can help you prepare your return and determine if you qualify for the Cal EITC and other refundable credits.
- Find a Volunteer Income Tax Assistance (VITA) location.
- CalEITC4Me.org – Free Tax Prep Finder
- Fee based: Tax preparer – How to Select an Income Tax Return Preparer
We created 5 new notices to help administer the new Cal EITC. All Cal EITC notices are tax year specific. If you receive one of these notices, please read it carefully as it will contain specific information to assist you in responding.
The following is a brief description of each notice:
|Notice||Reason you received it|
|FTB 4502, Additional Documentation Required - Refund Pending||We send this notice when we determine we do not have enough information to approve the claimed Cal EITC prior to processing the tax return and issuing a refund. This notice provides specific instructions on the type(s) of supporting documentation a taxpayer must submit to validate the claimed Cal EITC.
If we do not receive the required supporting documentation within 30 days of the notice date, we will not issue a refund in the amount of the claimed Cal EITC, but rather will send FTB 5818, Notice of Tax Return Change to the taxpayer advising them of the adjustment.
If we receive the required supporting documentation to substantiate the claim, we will issue the refund within 8 weeks of receiving the documentation.
If we receive the required supporting documentation and the information does not substantiate the claim, we will not issue the refund and send FTB 5818, Notice of Tax Return Change to the taxpayer advising them of the adjustment.
If we receive the required supporting documentation and the information only substantiate part of the claim, we will issue a refund with an adjustment code and FTB 1020 insert to the taxpayer advising them of the adjustment.
Send the required documentation to:
FILING COMPLIANCE BUREAU MS F-151
|FTB 4513, Earned Income Tax Credit - Acceptance Letter||We send this notice when a taxpayer submits the required supporting documentation to substantiate their claimed Cal EITC and we accept the documentation. This notice serves as confirmation we accepted the claimed Cal EITC for the tax year on the notice.
This notice is only sent after a FTB 4514, Additional Documentation Required - Refund Issued or FTB 5818 Notice of Tax Return Change has been sent to a taxpayer.
|FTB 4514, Additional Documentation Required - Refund Issued||We send this notice when we determine we do not have enough information to confirm the taxpayer qualified for the claimed Cal EITC and we already processed the tax return and issued a refund.
This notice provides specific instructions on the type(s) of supporting documentation the taxpayer must submit to validate the claimed Cal EITC.
If we do not receive the required supporting documentation within 30 days of the notice date, or the provided documentation does not substantiate the claimed Cal EITC, we will send FTB 4515, Earned Income Tax Credit – Adjustment Made to the taxpayer advising them of the adjustment.
Send the required documentation to:
FILING COMPLIANCE BUREAU MS F-151
|FTB 4515, Earned Income Tax Credit – Adjustment Made||We send this notice when we receive insufficient documentation or do not receive a response after sending FTB 4514, Additional Documentation Required - Refund Issued. This notice indicates we adjusted the claimed Cal EITC and provides the specific reason(s) for the adjustment.
In addition, the notice provides the taxpayer(s) with options should they disagree with the decision to adjust their Cal EITC.
|FTB 4516, Earned Income Tax Credit Denial||We send this notice when:
The federal EITC is a refundable federal credit that can reduce the federal tax you owe or result in a refund to you. To find out if you are eligible to claim the federal EITC on your federal tax return, you can:
- Go to the Internal Revenue Service (IRS) website to find out if you qualify for the federal EITC.
- Call the IRS at 800.829.4477 and enter topic 601 when instructed.
Paid preparers must meet due diligence requirements when they determine a taxpayer's eligibility for, and the amount of, the California Earned Income Tax Credit (Cal EITC). Generally, if a preparer prepares Cal EITC claims, a preparer must ask all the questions required on FTB 3596, Paid Preparer's California Earned Income Tax Credit Checklist, as well as, ask additional questions when the information the client gives seems incorrect, inconsistent, or incomplete.
Preparers must complete and submit the FTB 3596 for all paper and electronic tax returns and all other Cal EITC claims. The form is required for all Cal EITC claims with a qualifying child and claims with no qualifying child. Also, preparers must keep a copy of the completed FTB 3596 and the worksheet showing the Cal EITC computation contained in the instructions of FTB 3514, California Earned Income Tax Credit.
If paid preparers fail to comply with due diligence requirements, the Franchise Tax Board may assess a $500 penalty for each failure.
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