Many Kansans are eligible for significant financial benefits from a special federal tax credit for working people who earn low or moderate incomes. And this year, these same working people may also be eligible for the new state tax credit.

The federal Earned Income Tax Credit (EIC) is a refundable credit which could provide up to $3,756 to eligible citizens. And workers who are eligible for the federal EIC may also be eligible for the new state of Kansas EIC, which is equal to 10 percent of the federal earned income tax credit.

The EIC has several important purposes: to reduce the tax burden on low-income workers, to supplement family wages, and to make work more attractive than welfare.

The Kansas Department of Social and Rehabilitation Services (SRS) works with families eligible for public assistance because of poverty. The agency is working to inform people they may be eligible for both the federal and state EIC. With the emphasis SRS has been placing on helping to move people from welfare to work and with federal welfare reform, the tax credit may be especially helpful for people to obtain and maintain employment.

"Many people receiving public assistance work at low-paying jobs," said Rochelle Chronister, SRS Secretary. "For many, the EIC gives them a chance to get ahead and move toward self-sufficiency."

Workers who qualify for the federal EIC and file a federal income tax return can get back some or all of the federal income tax taken out of their pay during the year. They may also get

extra money back from the government. Even workers whose earnings are too small to have had to pay taxes can get the federal EIC.

Examples of federal EIC payments include the following:

*Workers who were raising one child in their home and had family income of less than $26,473 in 1998 can get an EIC of up to $2,271.

*Workers who were raising more than one child in their home and had family income of less than $30,095 can get an EIC of up to $3,756.

*Workers who were not raising children in their home but were between the ages of 25 and 64 on December 31, 1998 and had income below $10,030 can get an EIC of up to $341.

Neither the federal or state EIC affects benefits like food stamps, Supplemental Security Income (SSI), Medicaid, or public housing.

To get the federal EIC, a family files an IRS tax return using form 1040 or 1040A (not the 1040EZ) plus a 'Schedule EIC.' Even families who would not otherwise have to file a tax return must do so in order to receive an EIC. For families who may already have filed this year, an amended return with Schedule EIC is necessary to receive the EIC benefit.

All these forms are available from the Internal Revenue Service.

Qualifying adults without children may receive federal EIC by filing form 1040, 1040A, or 1040EZ and writing 'EIC' on the Earned Income Credit line of the tax form.

Workers can get the EIC in one check from the Internal Revenue Service after they file a return. But for workers caring for a child or children, there is another choice that can be of benefit to both employers and workers all year long. It is called the 'advance EIC payment.'

Employers can add part of a workers' federal EIC to every paycheck, and the worker gets the rest of the credit after filing a tax return. This benefits employers because they are able to increase an employee's take-home pay at virtually no cost to the business.

The federal EIC advance payment benefit is begun by the employee by filing a W-5 form with the employer, who is required by law to provide the EIC payment to eligible workers.

The Kansas Earned Income Credit is available only to Kansas residents. To determine the state EIC, multiply the amount of credit allowed on your federal return by 10 percent. The Kansas EIC is available if the amount you earned in 1998 was less than $26,473 with one qualifying child, $30,095 with more than one qualifying child or $10,030 without a qualifying child.

For more information about the federal EIC, call the IRS toll-free at 1-800-829-1040. For more information about the state EIC, call the Kansas Department of Revenue's Tax Assistance Center in Topeka at 785-296-0222.

Page Last Updated: May 29, 2001