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In California and throughout the United States, few, if any, taxpayers actually enjoy paying taxes. However, the duty to file informational returns and pay taxes due on income and other economic activity is a duty that should never be neglected. In most situations, the failure to file or pay taxes typically results in fines, penalties, and other consequences that add further complications to the problems that initially created the tax noncompliance.

Unfortunately, for some Californians, the temptation to avoid filing or paying taxes can be strong. California is a beautiful and vibrant state to live in, but the tax burden can be difficult for many working middle-class families to satisfy. Thankfully, state legislators in Sacramento have taken steps to reduce the tax burden in California for many families through the enactment of a California Earned Income Tax Credit (Cal EITC). Taxpayers should be careful when claiming this benefit because of the strict compliance guidelines set forth by the California Franchise Tax Board. The Sacramento tax lawyers at NewPoint Law Group can address tax mistakes due to a failure to claim Cal EITC or errors due to a potentially inappropriate claim for the benefit.

What Is the California Earned Income Tax Credit (Cal EITC)?

The California Earned Income Tax Credit, or Cal EITC, is a tax credit that is available to residents of the state of California. Some taxpayers may be already familiar with the general idea of an earned income tax credit because of a similar federal tax credit exists. The tax credit is particularly attractive and beneficial to taxpayers because it results in a direct dollar-for-dollar reduction in taxes paid. In contrast to a tax deduction, a credit is typically preferable because a tax deduction merely allows a taxpayer to reduce reported income and may or may not result in any actual tax savings.

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According to The Sacramento Bee, many families in the Sacramento area have already claimed this tax credit. According to data provided by the California Franchise Tax Board, for every 1,000 returns filed in Sacramento County, 30 returns claim the Cal EITC. The newspaper details that south Sacramento’s 95823 ZIP code had 1,508 approved claims, while Florin’s 95828, Del Paso Heights’ 95838 and Rancho Cordova’s 95670 zip codes were also areas where claims were concentrated.

Who Qualifies for Cal EITC?

The income limits for the California EITC are rather low and eligibility is based on both one’s actual and adjusted gross income. Many self-employed small business owners may still be able to qualify for the credit due to how income is calculated. To start, for purposes of the Cal EITC, includes only W-2 income, salary, tips, and other compensation subject to state withholding. Most notably, Cal EITC earned income calculations do not include income from self-employment. As for the adjusted gross income limits, the foregoing also applies along with the fact that business expenses and losses can conceivably reduce one’s adjusted gross income to levels necessary to claim this tax credit.

Aside from the above income-based qualifications, the taxpayer and all claimed qualifying children must all have a Social Security number issued by the Social Security Administration that is valid for employment. If married, the taxpayer must file jointly and cannot elect to file using the married/RDP filing separately status. Finally, the taxpayer claiming the credit must live in California for at least six months of the year.

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What if I Already Filed by Tax Return But Still Want to Claim Cal EITC?

Since the original tax filing deadline in the state passed in April, some taxpayers may have filed their taxes without claiming this credit. For taxpayers who have yet to file their taxes, under California tax law, all taxpayers receive an automatic extension of six months to file their state return only. This means that even if you haven’t filed your taxes, there is still time to do so and, if appropriate, claim this tax credit.

If you have already filed your tax return with the California Franchise Tax Board, you do have the option to amend your return. To amend your return to claim the California EITC and any other credits or tax deductions you think you may benefit from, you must complete a Form 540X and Form 3514 to claim the credit.

Work with Strategic Sacramento Tax Lawyers

If you have concerns about potential mistakes you made with your taxes, the Sacramento tax attorneys of NewPoint Law Group may be able to help. If you have yet to file your state or federal taxes for 2015, we can handle the filing and work to mitigate any penalties you may face. We can amend a tax return to claim deductions and credits a taxpayer missed or to correct other mistakes – such as an inappropriate claim for a deduction — before an audit or exam results in the taxpayer facing potentially serious consequences. To schedule a confidential consultation, call NewPoint Law Group at 1-800-358-0305 today or contact us online.