Important Information about Income Support Programs for New York State Residents

Tax Credits
More than 925,000 of New York's children and teens live in poverty. That is one in every five children in the state. The majority of these children live in hard-working families.

Since its inception in 1975, the Earned Income Tax Credit (EITC) has grown to become the single most important federal anti-poverty program in the nation. In 2003, the EITC lifted 4.4 million individuals, including 2.4 million children, out of poverty. In that year, 21.4 million families and individuals claimed the credit and the IRS gave back $38.3 billion in EITC refunds. Also in 2003, 1.4 million New Yorkers received more than $3.25 billion in EITC refunds with an average refund of nearly $2,300.

For New Yorkers who worked even part-time in 2005, the EITC can be worth up to $5,700, and more if they live in New York City, depending on income. The Child Tax Credit (CTC) can add up to an additional $1,000 per child. Despite the obvious benefit of the EITC, nearly 20 percent of eligible New Yorkers do not claim the credit. These workers are missing out on thousands of dollars that can help them cover expenses like rent, utilities, groceries and childcare.

• Earned Income Tax Credit
• Advance Earned Income Credit
• Child Tax Credit
• Is there help to file your taxes?

Information found in this section was developed for the use during the 2005 Tax Season.

Earned Income Tax Credit
The Earned Income Tax Credit (EITC) is a refundable federal, New York State and New York City tax credit for people who work but don't earn high incomes. New York State's EITC adds an additional 30% to the total federal tax credit and New York City adds 5%. Workers who qualify for EITC must file state and federal tax returns to claim the credit. When the EITC is more than the taxes owed, workers may receive a refund for the difference. Even workers whose incomes are too small to have to file income taxes may qualify for EITC.

Who Can Get EITC and How Much is it Worth?
EITC is a tax credit for people who work full-time or part-time. So people who worked at any point in 2005 may qualify, depending on their income:

• People who were raising two or more children in 2005 and whose family earned less than $35,263 ($37,263 if married), can get up to $5,720 in federal and state EITC ($5,940 in NYC);
  
• People who were raising one child in 2005 and whose family earned less than $31,030 ($33,030 if married), can get up to $3,461 in federal and state EITC ($3,594 in NYC);
  
• New Yorkers don't need to have children to claim the Earned Income Tax Credit. People between the ages of 25 and 64 who earned less than $11,750 ($13,750 if married) in 2005 can get a combined federal and state EITC of up to $519 ($539 in NYC).
  
  

Which Children Qualify for EITC?
Children must be 18 years of age and younger or 23 and younger if they are full-time students. Totally and permanently disabled children of any age can qualify. Children must live in the worker's home in the United States for more than half the year, and include:

Can Immigrants Receive EITC?
Many legal immigrants who work can qualify for EITC as long as they meet the eligibility requirements. Immigrants, their spouses and children listed on the Schedule EIC* (Earned Income Credit) of their tax return must all have valid social security numbers that permit them to work legally in the United States. Immigrants who only have an Individual Taxpayer Identification Number (ITIN) are not eligible for the EITC but can still file taxes and may be eligible for other credits like the Child Tax Credit.
*The IRS refers to the Earned Income Tax Credit simply as the Earned Income Credit.

How do Workers Claim EITC?
Workers must file federal and state tax returns to claim this credit. Workers raising children in 2005 must file either federal form 1040 or 1040A and attach Schedule EIC. Married workers must file a joint form to get the EITC. Workers not raising children can file any tax form including 1040EZ. These workers must write "EIC" (or the dollar amount of their credit) on the EIC line on the tax form. Workers claiming the state EITC must file for the federal credit and complete NYS form IT-215, Claim for Earned Income Credit and attach it to their state income tax return.

Does EITC Affect Public Benefits?
In most cases the EITC does not affect eligibility for benefits like TANF, Medicaid, Food Stamps, SSI or public or subsidized housing. The EITC is not counted as income when determining eligibility for these programs. However, it may be counted as a resource for some of these programs if not spent within certain timeframes. Often times if the recipient has few or no other resources the EITC is not enough to exceed the resource limit for these programs.

Does Someone have to Wait to File Their Taxes to get EITC?
With the Advance EITC payment option, some workers who are raising children can get part of their EITC in their paychecks throughout the year and the rest as a refund from the IRS after they file their taxes. There is no New York State or New York City Advance EITC. Workers who think they might be eligible should talk to their employer and fill out a 2006 W-5 form Earned Income Credit Advance Payment Certificate.

Check out our section on the Advance EITC.

Advanced EITC
With the Advance Earned Income Tax Credit (EITC), some workers who are raising children don't have to wait to file their taxes to get their EITC. If they qualify, workers can get part of their federal EITC in their paychecks throughout the year and the rest in a refund from the IRS after they file their federal taxes. This money helps workers cover expenses like utilities, food and childcare - making it easier for working New Yorkers to keep working. (There is no NYS or NYC Advance EITC.)

Advance payments depend on the total income a family expects to earn in 2006. If a worker is married, the amount of their advance payments also depends on if their spouse has also filed for the Advance EITC. Workers can get up to about half of the EITC amount they are entitled to for the year. The most a worker will receive in advance payments is $1,650. For example, a worker making between $6.00 and $8.00 an hour would receive an extra $137 a month in his or her paycheck. When workers file their federal taxes for 2006 they can receive the rest of their EITC. Workers that receive advance payments must file their 2006 federal income tax return.

Who Qualifies for the Advanced EITC?
Workers raising at least one child who expect their income will be less than $32,001 (combined income of $34,001 if married) in 2006 can receive Advance EITC payments. Workers who are not raising children are not eligible for advance payments - even though they may be eligible for the EITC.
Workers who are self-employed, have more than one job, and those whose employers do not withhold social security and Medicare taxes from their paycheck can not take the Advance EITC.

Which Children Qualify?
Children must be 18 years of age and younger or 23 and younger if they are full-time students. Totally and permanently disabled children of any age can qualify. Children must live with the worker in the U.S. for more than half the year, and include:

How do Workers Get the Advanced EITC payment?
Workers who think they are eligible for advance payments should complete the 2006 W-5 form "Earned Income Credit Advance Payment Certificate" and give it to their employer. For married workers, both spouses should give a W-5 form to their employers. Workers can file a W-5 form at any time during the year, but must file a new W-5 at the beginning of each year to continue receiving advance payments.

If a worker's income increases above the EITC levels or something else changes that makes them no longer eligible for advance payments they must fill out a new W-5 and give it to their employer so they can stop payments. Workers who hold more than one job, plan to get married during the year or expect their income to increase substantially should not choose advance payments. Workers who are not eligible but receive advance payments or receive too much money may have to pay it back when they file their taxes.

What is the Employer's Role?
Any eligible worker who files a W-5 must be given advance payments. Employers simply subtract the advance payments they have given workers from the total taxes withheld from all employees they would otherwise deposit with the IRS. For more information, see the IRS "Employer's Tax Guide, Circular E." It is available by calling 1-800-Tax-Form (1-800-829-3676), or downloading it from www.irs.gov.

Child Tax Credit
The Child Tax Credit is a federal tax credit, for families with children 16 years of age and younger, worth up to $1,000 per child. The CTC can reduce or eliminate any federal income tax a worker owes. Families may also qualify for a refund. Some families can get the CTC even if they do not owe income tax.

Who Can Get the CTC?
To be eligible for the CTC, a worker must:

The maximum CTC amount of $1,000 per child is available to single parents with incomes up to $75,000 and married parents with combined incomes up to $110,000. The credit gets smaller as income increases beyond these levels.

Which Children Qualify for the CTC?
A child must have been 16 years of age or younger at the end of 2005. The child must have lived in the US with the worker for more than half of 2005. The worker must provide more than half of the support for the child they are claiming. The child must have a social security number or Individual Taxpayer Identification Number.

Qualifying children include:

Can Immigrants Claim the CTC?
Yes. Immigrant workers, their spouses and children claimed for the CTC must have either a social security number permitting them to work or an ITIN. The children claimed must have lived with the worker in the U.S. for more than half of 2005.

What is an ITIN?
An Individual Taxpayer Identification Number (ITIN) is issued by the IRS to immigrants who do not have social security numbers and would like to file taxes. An ITIN is used on a tax return in place of a social security number. It does not change a worker's immigration or employment status. To apply the worker should attach form W-7 "Application for IRS Individual Taxpayer Identification Number" to his/her tax return.

How do Families get the CTC?
Workers must file a federal tax return (form 1040 or 1040A) and complete the CTC worksheet. The CTC is first used to reduce or eliminate any income tax a worker owes. If any of the CTC is left over, the worker must complete and file form 8812. This form is used to figure out if the family qualifies for a CTC refund and if so, how much. This refund is called the Additional Child Tax Credit. Form 8812 must be attached to the tax return for the family to receive the CTC refund. If a worker claims a child who is not a dependent, they must also submit form 8901.

Does the CTC Affect Public Benefits?
The CTC does not affect eligibility for benefits like TANF, Medicaid, Food Stamps, SSI or public or subsidized housing. The CTC is not counted as income or resources when determining eligibility for these programs.

Is there help to file your taxes?
Yes! There are free-tax filing sites located throughout New York that offer high-quality tax preparation through IRS-certified volunteers. These sites use e-file- to ensure that tax refunds are received as quickly as possible. To find a site call the IRS at 1-800-829-1040 or, in New York City call 311. You can also download or request CDF-NY's "Getting Your Taxes Done for Free in Your Neighborhood" directory for NYC. To be eligible for free tax filing assistance, you must have earned less than $40,000 with dependent children or earned less than $20,000 without dependent children.

These free sites help taxpayers avoid unnecessary tax preparation fees and excessive interest from Refund Anticipation Loans (RALs). RALs are short-term loans with interest rates that can exceed as much as 700 percent! The loan is repaid from the tax refund, but the fees associated with the RAL end up costing the individual a large percentage of their refund. The appeal to many families is that with the RAL, families can receive their tax refunds within two days. Most do not realize that with direct deposit to a bank account they can get their full refund from the IRS within about 10 days - for free. In 2004, $207 million was diverted to commercial tax preparers and lenders to pay for tax preparation and RALs in New York State with an average cost to taxpayers of $265. For more information, see CDF-NY's new report, "Keeping What They Earned: Working New Yorkers and Tax Credits."

Even with free tax filing available, some people may wish to visit a professional tax preparer. These people may be eligible for discounted tax preparation with H&R Block. The NYC EITC Coalition has partnered with H&R Block to offer discounted tax preparation to qualifying individuals: A coupon worth $50 off tax preparation, with a total fee for tax preparation of no more than $75. The coupon can not be used in conjunction with a Refund Anticipation Loan.