BOOSTING FINANCIAL STABILITY THROUGH TAX CREDITS DECEMBER 10, 2014

Transcription

1 BOOSTING FINANCIAL STABILITY THROUGH TAX CREDITS DECEMBER 10, 2014

2 Today s Moderator Elizabeth Jennings Director, Training and Technical Assistance National Disability Institute

3 Listening to the Webinar The audio for today s webinar is being broadcast through your computer. Please make sure your speakers are turned on or your headphones are plugged in. You can control the audio broadcast via the audio broadcast panel If you accidentally close the panel, you can re-open by going to the Communicate menu (at the top of the screen) and choosing Join Audio Broadcast 3

4 Listening to the Webinar, continued If you do not have sound capabilities on your computer or prefer to listen by phone, dial: (Toll-Free Number) Meeting Code: You do not need to enter an attendee ID.

5 Captioning Real-time captioning is provided during this webinar. The captions can be found in Media Viewer panel, which appears in the lower-right corner of the webinar platform. If you want to make the Media Viewer panel larger, you can minimize other panels like Chat, Q&A, and/or Participants. 5

6 Submitting Questions For Q&A: Please use the chat box or Q&A box to send any questions you have during the webinar to Elizabeth Jennings or Nakia Matthews and we will direct the questions accordingly during the Q&A portion. If you are listening by phone and not logged in to the webinar, you may also ask questions by ing questions to Please note: This webinar is being recorded and the materials will be placed on the National Disability Institute website at 6

7 Technical Assistance If you experience any technical difficulties during the webinar, please use the chat box to send a message to the host Nakia Matthews, or you may also nmatthews@ndi-inc.org. 7

8 Special Thank You To Our Sponsors National Disability Institute recognizes and thanks our sponsors:

9 National Disability Institute A national research and development organization with the mission to promote income preservation and asset development for persons with disabilities and to build a better economic future for Americans with disabilities.

10 NDI s Real Economic Impact Network An alliance of organizations & individuals dedicated to advancing the economic empowerment of people with disabilities. Consists of more than 900 partners in more than 100 cities in US. Includes non-profits, community tax coalitions, asset development organizations, financial education initiatives, corporations & private-sector businesses, federal/state/local governments & agencies, and individuals & families with disabilities. All partners join forces to embrace, promote & pursue access to & inclusion of people with disabilities in the economic mainstream.

11 Tax Credit Basics Earned Income Credit Child Tax Credit Premium Tax Credit Free Filing Options Today s Agenda Opportunities to Improve Tax Credit Outreach Activities Resources to Support Tax Credit Outreach Questions and Answers 11

12 Today s Presenters Roxy Caines Earned Income Credit Campaign Director Center on Budget and Policy Priorities Janne Huang Earned Income Credit Outreach Assistant Center on Budget and Policy Priorities

13 Boosting Financial Stability Through Tax Credits Date: December 10, 2014 Presentation by: Roxy Caines & Janne Huang Organization: Center on Budget and Policy Priorities Phone: Website: 13

14 What are the Earned Income Credit (EIC) and the Child Tax Credit (CTC)? Federal tax benefits for lower- and moderate-income working families and individuals Purpose: Offset income and payroll taxes Supplement wages Provide a work incentive Key Features: Reduces taxes workers may owe Even if workers don t owe taxes, they may be eligible Some families can claim both credits 14

15 Did You Know? The EIC & CTC Lift More than 9 Million Above the Poverty Line

16 How do Workers Use the Credits? Child Care Rent & Utilities Transportation Auto Repairs Basic Needs Medical Expenses The credits help workers keep working and care for themselves and their children. 16

17 Why is Outreach Needed? EIC Eligible Workers 75 80% Claim EIC 20-25% Do Not Claim EIC 17

18 The Earned Income Credit 18

19 How Much Can Workers Earn and Still Qualify for the EIC? For Tax Year 2014: Number of children: Income less than: EIC up to: 3 or more children $46,997 $6,143 2 children $43,756 $5,460 1 child $38,511 $3,305 No children $14,590 $496 Income limits for married workers are $5,430 higher than these amounts. Workers not raising children must be between the ages of 25 and 64. Investment income cannot exceed $3,

20 Credit Amount ($) The Federal EIC in Tax Year ,000 6,000 Maximum Benefit $5,460 Maximum Benefit $6,143 M 5,000 4,000 Maximum Benefit $3,305 3,000 2,000 1,000 Maximum Benefit $ Income ($) No Children 1 Child 2 Children 3 or More Children Married Filing Jointly 12

21 Get a Larger Refund Through State EICs: Connecticut (27.5%) Delaware (20%) District of Columbia (40%) Illinois (10%) Indiana (9%) Iowa (15 %) Kansas (17%) Louisiana (3.5%) Maine (5%) Maryland (25%, 50%) Massachusetts (15%) Michigan (6%) Minnesota (varies with earnings; average is 36%) Nebraska (10%) New Jersey (20%) New Mexico (10%) New York (30%) Ohio (10%) Oklahoma (5%) Oregon (8%) Rhode Island (10%) Vermont (32%) Virginia (20%) Wisconsin (4% - 34% based on # of children) **States in blue are refundable credits, green are non-refundable. Amounts listed are percentage of federal credit.** 21

22 The Child Tax Credit 22

23 How Does the CTC Work? 1. Reduces or eliminates any income tax owed or withheld. 2. Workers may get any remaining CTC as an additional refund also referred to as the Additional Child Tax Credit (ACTC). 23

24 How Much Can Workers Earn and Qualify for the CTC? Workers who earned more than $3,000 in 2014 can get a CTC refund. Income less than: Filing status: $110,000 Married $75,000 Single or Head of Household $55,000 Married filing separately The CTC is worth up to $1,000 for each qualifying child. 24

25 EIC & CTC Eligibility 25

26 What Counts as Earned Income? Includes: Doesn t Include: Wages, salaries, and tips Net earnings from selfemployment Non-taxable earned income Payroll deductions for dependent care or retirement plans Union strike benefits Public benefits Social security, SSI, welfare Employer-paid disability benefits Other income, such as: Military combat pay Unemployment Alimony and child support Interest on bank accounts Investment income 26

27 Who Qualifies for the EIC and CTC? Workers who are: Working full-time, part-time or self-employed Also receiving public benefits Single or married Raising a qualifying child Some very low-income workers without a qualifying child may be able to claim the EIC Immigrants legally authorized to work CTC ONLY: Immigrant workers with Individual Taxpayer Identification Numbers (ITINs) Some non-custodial parents 27

28 Definition of a Qualifying Child EIC CTC Relationship Residence Age Son, daughter, grandchild, stepchild, adopted child, brother, sister, stepbrother, stepsister (or their descendants) or foster child placed by a government or private agency Must live with worker in the U.S. for more than half the year Under 19 or 24 if full-time student or any age if totally and permanently disabled Under 17 If you are a qualifying child, you cannot claim the EIC yourself. If a child is claimed for both the EIC and CTC, the same worker must claim both credits. 28

29 Tax Credit Eligibility & Public Benefits Current rules enacted by Congress: Federal tax refunds do not count as income for any program with federal funding Refunds that are saved do not count against resource limits for 12 months after the refund is received 17

30 How do the Credits Work? 30

31 Meet Craig Craig is single and 41 years old. He earned $5,000 in He does not owe income tax. His EIC refund is $384! 31

32 Meet Maxine Maxine is a single mom raising her 6-year-old son. She earns $19,000 in $200 in income tax has been withheld. Her total EIC & CTC refund is $4,114! 32

33 How Do You Claim the Credits? You must file a tax return! Form 1040 or Form 1040A not 1040EZ EIC - Schedule EIC CTC Schedule 8812 for CTC Workers not raising children can file any form Eligible workers can claim EIC and CTC refunds for up to 3 previous years 33

34 Filing for Free 34

35 The High Cost of Commercial Tax Preparation When it s time to file a tax return, many workers seek help from a commercial tax preparer. 35% Self-Prepare or Use Free Filing Programs 65% Use Commercial Tax Preparers EIC Claimants Average fees range from $85 - $120 for e-filing. 35

36 What are RALs & RACs? Refund Anticipation Loans (RALs) Very high-interest loans arranged by a commercial tax preparer with a payday lender or non-bank business Interest rate can be > 180 percent; processing fee can be $80 or more No guarantee refund will equal the loan amount Refund Anticipation Checks (RACs) Replacing usage of RALs Temporary bank account established to receive refund and issue as a check No faster than direct deposit 36

37 Are There Alternatives to RALs and Commercial Tax Preparation? Volunteer Income Tax Assistance (VITA) Free tax filing help for low-income workers at community sites. IRS Toll-free Locator: In many communities across the country Volunteers are trained under IRS guidance Taxpayers can receive refund in 7-12 days through e-filing VITA & Tax Counseling for the Elderly (TCE) sites are listed at (key word search site list ) TCE sites (often coordinated through the AARP Tax-Aide Program) can also be found at also provides free federal and state tax return filing 37

38 Premium Tax Credit 38

39 What Are Premium Tax Credits (PTC)? Provide assistance with the cost of healthcare for people purchasing coverage in a Health Insurance Marketplace Advance credit option Paid monthly by IRS to private insurance plan chosen through Marketplace Consumer may have a monthly premium contribution Limited to 2 to 9.5 percent of family income Advance credit will be reconciled with income shown on tax return Some states rely on the federal Marketplace (healthcare.gov). Other states have their own marketplace. The same rules apply. Insurance can be purchased only during open enrollment or if a person has cause for a special enrollment period. Nov. 15, 2014 Feb. 15,

40 What Are Premium Tax Credits (PTC)? Eligibility Criteria for PTC: To receive a premium tax credit, a person must: 1. Be enrolled in a Marketplace plan 2. Have income between 100 and 400 percent of the federal poverty line (FPL) Individual: $11,670 - $46,680 Family of four: $23,850 - $95,400 Exception: Lawfully present immigrants with income under the poverty line are eligible for PTCs if they are ineligible for Medicaid because of their immigration status What counts as income? Modified Adjusted Gross Income (MAGI) 40

41 What is Modified Adjusted Gross Income (MAGI)? 41

42 What Are Premium Tax Credits (PTC)? Eligibility Criteria for PTC Continued: To receive a premium tax credit, a person must: 3. Have an eligible filing and dependent status Cannot be married filing separately Cannot be a dependent 4. Be ineligible for minimum essential coverage (MEC), which includes most public and employer-sponsored coverage 42

43 What is Minimum Essential Coverage (MEC)? Starting in 2014, most people are required to have health insurance that qualifies as minimum essential coverage and to report it on their tax return. Coverage for one day = coverage for the month 43

44 Minimum Essential Coverage (MEC) QUALIFIES AS MEC Employer sponsored coverage Employee coverage COBRA Retiree coverage Individual health insurance Purchased from a health insurance company Purchased through the Marketplace Provided through a student health plan Government-sponsored plans Medicare Most Medicaid CHIP Most TRICARE Most VA State high-risk insurance pools Peace Corps Refugee Medical Assistance LIMITED BENEFITS THAT ARE NOT MEC Accident or disability insurance Single-benefit coverage (e.g., dental-only or vision-only plans) Workers compensation AmeriCorps/AfterCorps coverage Limited-benefit Medicaid Family planning services Tuberculous treatment Pregnancy-related Emergency medical condition 1115 demonstrations Medically needy Limited-benefit TRICARE Space-available care Line-of-duty care Exemption available for 2014 no penalty 44

45 Minimum Essential Coverage (MEC) Some people who do not have MEC for the entire year will have to pay a penalty to IRS More than 14 exemptions from penalty including: Low income Medicaid ineligibility because state didn t expand Medical expense debt Unaffordable insurance choices Homeless Ineligible immigrants Apply for a Hardship Exemption through the Marketplace: 45

46 Medicaid Expansion Who is newly eligible? Most newly eligible are adults, including parents (whether or not they work) and adults without dependent children At what income? 138% of federal poverty level (FPL) Depends on family size 46

47 About Half the States Are Likely to Expand Medicaid in 2014 As of May 24,

48 Child and Dependent Care Credit Federal tax credit for expenses to care for a child or a dependent with disabilities to be able to work. Reduces income tax not a refundable credit Maximum expenses: $3,000 for one child, $6,000 for two or more Credit amount: 20-35% of expenses depending on income 26 states also have a credit: in 12 states the credit is refundable 48

49 Reaching Out to Promote the Credits 49

50 Organizations Serving People With Disabilities Can Help Promote the Tax Credits You do NOT have to be a tax expert to help families claim their credits. Incorporate outreach activities into your routine work and encourage your partners to do the same. Build partnerships to expand your outreach efforts. 50

51 Notify Clients & Check-in Alert workers about the EIC and CTC and provide the basic information they need: Eligibility guidelines VITA site locations Display EIC/CTC posters Print messages about the tax credits and free tax filing assistance Notices Newsletters Outreach materials Provide referrals to existing free tax preparation sites or arrange a free tax help day at your office Refer clients to Marketplace and Navigators/Assistor agencies that assist clients during open enrollment Nov. 15, Feb. 15, Ask your clients if they enrolled If no: refer to Marketplace If yes: do a checkup Advise to immediately report any income & family changes to Marketplace 51

52 Inform & Engage Your Colleagues Feature the tax credits as the topic at your next staff meeting or training session Use technology Arrange to post tax credit info on your intranet Include the tax credits in your electronic signature and invite coworkers to do the same. Examples: Help working families get all the money they earned! Do you know about tax benefits for people who work? Why pay when you can file your taxes for free? Share resources that colleagues can pass on to others 52

53 Collaborate with Community Groups Inform partner agencies about the EIC and CTC Coordinate a free tax help day or tax credit awareness event Invite partners to share tax credit messages on social media platforms FaceBook Twitter YouTube LinkedIn Google+ 53

54 Tax Credit Outreach in Action Goodwill Hawaii Honolulu, HI Accessibility Disability awareness Legal Aid Society of Greater Cincinnati Cincinnati, OH Free tax preparation days Privacy Davenport University Grand Rapids, MI Transportation to VITA site Mobile free tax services 54

55 Tax Credit Outreach Resources 55

56 Tax Credit Outreach Coalitions What are they? Promote the EIC and CTC and provide free tax preparation services. Often include a focus on asset-building and financial education. There may be one in your area! Visit the National EITC Partnership website: Includes a directory of local partnerships by state Spreadsheets identify coalition members, goals and activities IRS Territory Manger contact 56

57 REI Network s Virtual Toolkit Features resources for advocates, coalitions, and free tax preparation programs including: Disability awareness Social media Effective outreach strategies Preparation/Virtual-Toolkit.aspx 57

58 Legal Assistance on Tax Issues Low-Income Taxpayer Clinics (LITC) Programs partly funded by IRS grants in legal aid organizations, law schools, accounting schools, other nonprofits Provide assistance with tax issues, dealing with IRS, appealing decisions LITCs do not do routine tax return preparation, only if needed to resolve a problem Find a LITC: 58

59 Quick Links Affordable Care Act (ACA) IRS: Publication 5157 VITA/TCE Affordable Care Act: Form 8965 Health Coverage Exemptions: Draft Instructions for Form 8965: Form 8962 Premium Tax Credit: ww.irs.gov/pub/irs-pdf/f8962.pdf Draft Instructions for Form 8962: Centers for Medicare & Medicaid Services (CMS): Minimum essential coverage guidance for Medicaid: Center on Budget and Policy Priorities: Earned Income Credit s-easier-than-ever-to-find-out-if-youqualify-for-eitc

60 The Center on Budget and Policy Priorities National Tax Credit Outreach Campaign Can: Provide Tax Credit Outreach Kits Deliver technical assistance to help develop an outreach strategy Connect you to online resources: Fact Sheet on Tax Credits and People with Disabilities EIC/CTC flyers in 21 languages EIC Estimator Searchable Outreach Strategies Database Sample Press Releases EIC & CTC FAQs and much more! Request a copy of the 2015 Tax Credit Outreach Kit: 60

61 MyFreeTaxes MyFreeTaxes is a national initiative championed by three leading nonprofits - United Way, Goodwill Industries International, and National Disability Institute - sponsored by the Walmart Foundation Powered by H&R Block, is the only tax filing software to offer FREE federal and state tax preparation assistance for qualified individuals in ALL 50 states MyFreeTaxes partners with more than 1,000 community, nonprofit and faith-based organizations, local, state and government agencies that promote and provide on the ground support for the program Since 2009, MyFreeTaxes online and in-person tax preparation and filing services have helped millions of individuals and families claim more than $10 billion in tax credits and refunds Join a community of partners today by registering on the new Affiliate Portal and find information and resources to promote and implement MyFreeTaxes partners@myfreetaxes.com

62 Questions & Answers

63 Wrap-Up & Thank You Join us in 2015 for a new season of webinars! Check out future webinars and archived webinars (such as today s recording),

64 Special Thank You To Our Sponsors National Disability Institute recognizes and thanks our sponsors:

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