Page 1 NORTHROP GRUMMAN SYSTEMS CORPORATION Cashing in on EITC Teleconference February 1, 2013 3:00 p.m. ET Operator: John Kregel: Good afternoon ladies and gentleman, my name is (Allen) and I ll be your conference operator today. At this time I d like to welcome everyone to the Earned Income Tax Credit conference call. All lines have been placed on mute to prevent any background noise. After the presenters remarks there will be a question and answer session if you d like to ask a question during that time simple press star and then the number one on your telephone keypad. If you would like to withdraw your question please press the pound key. Thank you very much, Mr. John Kregel, please go ahead. Thank you, Operator, and thank you everybody for joining us this afternoon for our conference call on the tele-training on the earn income tax credit. I think you re about to receive a great deal of very useful information and I m delighted that we have Molly Sullivan from our team who is -- is doing this particular training. The -- Molly has worked with us since 2007 on our national training center, she has a lot of passion, different areas that she is -- is interested in, you know, in terms of employment, in terms of self-employment but also in terms of assisting individuals to maximize their -- their incomes and take advantage of all the -- the various financial support programs that are available to them. And is really our expert on the earned income tax credit and a lot of -- a lot of different topics in this particular area. Molly s the best we got for doing this and then I really think that you ll really enjoy the session this afternoon and hopefully you ll be -- you ll be able to take advantage of some of the information that s being shared. Now I also want to say that this is the first activity of the -- of this year s national training center contracts and so the -- there are a variety of activities that are under way at the present time and those will include -- there s an initial training that s going on this -- this afternoon or this week in Orlando, Florida and is just finishing up this afternoon. Although there are no -- no
Page 2 longer funding from Social Security for the (WHIP) program I believe, as most of you all know, there are -- that the National Training Center has been refunded in order to continue to do its work. And so we have a lot of resources that are available to you and I m going to encourage you not just to participate in today s call but look at some of the opportunities that we have for assisting you on a -- on a daily basis and then working long term with you or your agency or your state. So, we ve -- we re -- we re launching our monthly initial training that s going on, the next one is set up for San Diego at the end of February and we have a calendar online for the -- for the -- for the National Training Center initial training that you can reach by going to our website that one that s used for -- to register for this particular call. We will also be doing a lot of supplemental trainings this is our first supplemental training, these take the form of Webinars, tele-trainings or online course and we begin next month with a series of about two per month of those kinds of course that will be going underway at least through the end of the -- the end of the year. And there are lots of topics some of them relate very much to the technical aspects of delivering work incentive counseling and we ll talk about a variety of work incentives in detail. We ll also talk about assisting beneficiaries in terms of addressing overpayments that they might receive or assistance they might need in reporting earnings to social security. And then we ll do lots of things related to employment and financial stability, financial education over the course of -- of the year as well. So this is a -- a -- the first of a number of a large number of trainings that will be going on and I encourage you to -- to take a look at the calendar in terms of what might be useful for you and also to share this information with others in your organization or other folks in your network that might be interested in participating in some of these calls. All of the training provided by the -- the National Training Center is free to all participants. So, we can also have the opportunity to do technical assistance and if you re working with the beneficiary you -- you are working on a topic within the
Page 3 large array of social security provisions and work incentives that you are unfamiliar with or you d like some assistance on we have a mechanism to allow you to contact one of our trained and experienced regional liaisons who will assist you in any particular case that you might have if it s something that you are working on that you would like support, if you d like some direction in terms of how to do research on this particular topic. If you d like us to discuss, you know, potentially proposed ideas or proposed plans that you might -- that you might have. We re glad to assist you in one on one and that information in terms of who to contact is available on our Website if not please -- if you have specific questions please contact (Julie Shaw) who is the person who s been sending you emails related to this particular conference. So we are able to help individual work incentive counselors or people providing work incentive counseling services who have particular questions related to the situation that they are -- that they are in. We are also available to do onsite technical assistance, so if it s a situation where you would like, within your agency or across agencies within a network to -- to -- to come together and talk about a variety of issues we can do that through a technical assistance call or we can also do that by an actual site visit coming and sitting down with you. And those are -- are -- are requested through your individual liaison or through -- or through (Julie Shaw) and then we move quickly on those and try to schedule them as quickly as possible. So we have a lot of resources available that we can provide to you in order to give you the support that you need during this period of time where -- where responsibilities are -- are being shifted and funding s being shifted, at least we have the -- the training and technical assistance available to support you during this transition period. You know, the last thing I guess I would say is that we have a lot of information that is archived on our Website, trainings that have occurred previously and resource documents that have been developed and -- and if a searchable set of -- of -- of resource documents that -- that -- you know, cover just a large variety of topics in the -- in the area of work incentive counseling and delivering work incentive counseling services. So I m hoping that you
Page 4 will you ll find those useful but please check out the website and -- and see if there s anything further that we can do to assist you. This is a topic the earned income tax credit that has a lot of interest going, you know, at this particular time of the year and in terms of -- of the overall focus within work incentive counseling in terms of assisting individuals with their economic self-sufficient -- self-sufficiency so I -- I -- there are over 100 people that are registered for the call, there are I think about 35 states represented and so this is a great opportunity hopefully for you to, you know, receive this information and and then they ll be opportunities to ask questions throughout the presentation as well. So thank you for allowing me to -- to -- to kick off the meeting, Molly, and I ll turn it over to you for the -- for the remainder of the session. Great, thanks so much, (John), for sharing all that information and for the introduction. I thrilled that so many of you have made the time to join this call. The earned income tax credit is really a very powerful work incentive and -- and what I ll hope you see by the end of our time today is that you play -- you can play a really big part in helping people get connected to making this work incentive happen. Before we begin I just want to touch on really briefly a few housekeeping items, as (Allen) our operator mentioned, all of the lines have been muted to minimize background noise. So, given that we re going to have question and answer periods and your -- I want to make sure you know your questions are really important so please be sure to write them down as we re going along so that you so that you remember them when the Q&A period occurs. You know, generally any question you have, you know, there s several other people on the call that are thinking the same thing or wondering he same thing. I -- I also want to let you know that we re going to be recording this training for your colleagues who weren t able to attend and so we ll send out the link for that on the list serve next week. Lastly, I d like to just touch base about materials, so you should have received a power point presentation which is titles EITC212013, you re -- you re going to want to have that either open on
Page 5 your computer or printed out so that s the power point that I ll be walking you through over the course of our time together. We re just going to dive into the details of each slide one at a time. So that s it for housekeeping I think we re ready to -- to go ahead and jump in so why don t you go ahead and -- and have in front of you the slide, the first slide for the power point presentation. And what I d like to begin doing is first just clarify some semantics, so the earned income tax credit, EITC, goes by more than one name. In addition to be called the earned income tax credit you may also hear it referred to as the earned income credit or EIC and while these two terms are used interchangeably I m just going to use the term EITC today, so we ll just stick with that one. But in the event you hear earned income credit somewhere I want to make sure you know it s one and the same. Now I d also like to point out that we specifically chose to do this training call on this topic now because this is the time of year that EITC gets implemented, which means it s the time of year you can have the greatest impact in supporting beneficiaries in using this work incentives. So thank you for making the time to either refresh yourself on this information or if you expose yourself to it for the first time. All right, let s go ahead and turn to slide two and take a look at the agenda for our call today. So the plan today is to talk through what you re role is in regard to EITC. Then we ll cover the basics of what EITC is and who can get it, in other words the eligibility criteria, then we ll cover the details for how EITC interacts with financial needs based benefits and we ll finish up by sharing some tools and resources you can provide the beneficiaries in accessing EITC, as well as, some tools you can use in your effort to get the word out about this work incentive. And we actually have on the call with us today a colleague of yours from Arizona his name is (John Bobian) and he works with Able out of the Arizona and later in the call he s going to be sharing with us a bit about what their organization has been doing to help get the word out and support beneficiaries in using EITC. All right so that s the agenda, let s go ahead and turn now to slide three and begin taking a look at what your role is with EITC. So, as we look at your role in providing work incentive counseling services, it s really helpful if you
Page 6 think of EITC as simply being a work incentive. Because it s tied to the IRS it s easy to think of EITC as being something that s about taxes and therefore something that s beyond the scope of your work, but that really couldn t be further from the truth. See, EITC is a work incentive and as you all know work incentives are our business. So in regard to this work incentive it s absolutely appropriate within your role to inform beneficiaries that it exists. And that means providing basic information about what it is and how it works really which we ll be walking you through today. Now additionally, it s appropriate for you to share general information about the eligibility criteria just as you do with other work incentives. Now this conversation about the eligibility criteria could cause beneficiaries to begin asking you all sorts of tax related questions, questions that are beyond the scope of your work. So it s important with this work incentive that you re prepared to provide referrals to trained tax professionals. Now when it comes to EITC eligibility information your only providing a general overview so that a beneficiary can think through whether it might apply to them, that beneficiary begins asking you questions about a particular EITC eligibility criteria like what s a qualifying -- whether my child is considered a qualifying child or not. That s the point that you need to be prepared to say that that s a great question but it s outside my area of expertise here are a few trained experts that can -- that you can contact to get clarification. That kind of a statement is something you want to be comfortable saying if you re not already when it comes to advising them on this work incentive. Now to do that that means you need to know your local tax resources, so we ll be going over some details about the common tax preparation assistance resources that exist in communities a bit later in our training today. Now another key role you play with the EITC is addressing questions and concerns around how financial needs based benefits are impacted by getting a refund. So later in this training we re going to dive into details about this to make sure you feel prepared to address those questions. All right let s go ahead and turn to slide four and look at a bit more about your role with EITC just a few more things I d like to hit on. So as I mentioned in the last slide as a work incentive counselor you aren t trained to provide tax advice and since
Page 7 EITC is a tax credit that means it s essential for you to be prepared to provide referrals to trained tax experts. You re going to hear me say that a million times being prepared to refer to trained tax experts. So, in other words, what I mean is that being prepared to make that referral is a part of your role. So I want you to think of it as being a part of your process in helping using this work incentive. Lastly, I d like to remind you that -- that beneficiaries who receive tax refunds may need to report those to various benefit agencies that they re connected with. So what -- what you re going to want to do is clarify with your local public benefit agencies how, when and in what way they may expect that information to be reported to them. So for example does your SNAP agency or your local housing authority require a person report a tax refund on EITC right away or do they just want to know about it at the next recertification? Those kinds of details are great for you to be clear about so you can advise beneficiaries of the appropriate steps they need to take when they get that -- that big fat refund. Now at this one we ve covered your role in supporting beneficiaries those are kind of the key points around EITC so let s -- let s keep going here let s go ahead and turn to slide five and take a look at what this work incentive is all about. So this earned income tax credit s been around for a while it was actually created back in 1975 and the original purpose of it was to help offset the impact of taxes paid by workers with low to moderate income. So what -- what exactly is the earned income tax credit? Well its really it -- it s what it says it is, the way it helps a person is by it lowers the persons federal income tax liability. So the amount -- the amount a person can in tax credits actually lowers the amount of tax they owe dollar for dollar that s how a tax credit helps. And it s possible that it can lower the amount that a person owes in taxes so much that it results in a refund. And I think it s helpful to see an actual example for this to really sink in so let s go ahead and turn to slide six so I can walk you through an example and you can see how this happens. You ll see on this slide you have some details about a scenario person whose name is Jane. Now the figures here aren t actual figures from a real tax return
Page 8 but instead they re ballpark figures to give you a general idea of how this tax credit works. So, Jane s an SSI recipient and in 2012, last year, she earned $650 a month which resulted in $7,800 of earnings for the year. Now each month $80 was taken out of her paycheck for federal income taxes which was a total of $960 for the year that got taken out to pay for taxes. When Jane completed her tax return she figured out her tax liability, in other words the amount of tax she actually owed or was required to pay in 2012, and that was going to be $780. Now she also figured out that she was eligible for earned income tax credit and the amount she was eligible for $475. What that means is that instead of owing $780 in federal income tax for the year, she only really has to pay $305 because of the earned income tax credit. Now if your still with me here if you remember from earlier she had already paid $960 over the course of the year by having the federal income taxes withheld from her paycheck, so she s only required to pay $305 for the year, but she s already paid $960, what that means is that she gets a $655 tax refund and that s how a refund happens. So, now she s got $655 of money she wasn t expecting and she can do, you know, a whole host of things with that; pay a utility bill or pay off some debt, maybe she could even deposit this money in an individual development account and get it matched and double or triple her money for a savings goal that she has. So, you can see in the details of how an EITC works how powerful it is and -- and for some folks it can end up resulting in thousands of dollars in a tax refund, which is -- which is not common, you can t help many folks get that kind of money. So, it s a great work incentive. All right, so now that you can see how EITC actually works let s go ahead and turn to slide seven and talk through the key reasons why it s important for you to talk about. So, the earned income tax credit is actually not only the longest running antipoverty program but the largest which, you know, when I first read that it blew my mind because for so many years of working in this field and working with work incentives I, you know, it wasn t until I had been in the game for a while that I learned about EITC and I was floored that it was not only the longest but the largest anti-poverty program. And you can see that through
Page 9 the statistics, so in 2012 it lifted 6.6 million people out of poverty, half of which were children. And -- and so then when you look even further into the numbers what you ll see is some really fantastic information and that s that last year 26.5 million worker s received nearly $60.7 billion, and that s billion with a B not million, in earned income tax credits. That s about $2,200 per -- of EITC per worker, which is huge. Now as a result of some really significant marketing campaigns done by the IRS over the past few years the filing rate for EITC has actually increased and about four out of five eligible workers are claiming it each year, which is great. But since EITC has such a huge financial impact the goals is really to get everyone who s eligible claiming it each year. We really want to see five out of five people who are eligible claiming it. What s interesting is that the IRS found that while those who have claimed the EITC at least once before are much more likely to claim it again, which makes since, but the issue is really the fact that a third of the EITC population turns over each year. In other words about a third of the population of people eligible for EITC are newly eligible for it this year, they haven t claimed it before so they aren t really familiar with it. So reaching that new population each year is a key goal and one that requires some ongoing and aggressive marketing activities, not only by the IRS but also by community partners spreading the word at the local level. What s also interesting, I think you ll find very interesting, is that -- that -- that the IRS did some research to figure out how best to reach this group and they identified some target populations of people who aren t claiming EITC. They looked at their data and dug around and what they found, which is really important for you to know, is that people with disabilities are one of the target populations that are less likely to claim EITC. In fact they ve estimated that each year about a million people with disabilities could claim an EITC and aren t claiming it. So, now you can see how great it is that you re on this call and you re learning about EITC and you re going to go help people get connected to it because it s really just money that s sitting on the table that people aren t pulling down. You can really help spread the word.
Page 10 So, let s go ahead and turn to slide eight and let s begin to take a look at some of the details around this work incentive. So, as I mentioned earlier the EITC reduces the amount of federal income tax a worker owes, concept of how it works. So, however much an EITC a person s eligible for it s going to reduce their tax liability for -- a dollar for dollar. You ll see on this slide that there s a maximum credit that a worker can get and this year through EITC the numbers are listed here for you. And when I say this year the numbers for 2012 are listed, so just -- I realize we are in 2013, I do know what year we re in, in case you were worried about that, but the reality is right now what we re filing for, the tax year everyone s filing for right now is 2012, that s why you re seeing 2012 information up here. So, what you ll see are the maximum credits that can be claimed and the amounts that can be claimed depends, based on a number of things one of which is, you know, the -- the number of dependents a worker has in their household. So, you ll see here if - - if a worker has no dependents then the maximum tax credit is $475. So our example person, Jane, in the last slide she got the maximum amount she could get as a single person. Now if a work has one qualifying child then the maximum tax credit jumps to $3,169 and with two qualifying children it jumps to $5,236 and with three or more qualifying children it jumps to $5,891 which is substantial. For each category listed here the actual amount of EITC that can be claimed depends on the person s income so the actual amount varies from person to person. Now when beneficiaries begin looking over these details when you begin sharing this information, often questions arise about who is considered a qualifying child? So let s go ahead and pop over to slide nine and -- and I just want to hit on a few points about the -- the issue of qualifying children. So, in this slide you ll see there is a web address to the definition of a qualifying child and while you are certainly encouraged to provide folks information about this definition, please keep in mind that your role is only to give general information, remember you re not a tax expert. So, you don t want to try answering questions about whether the person in the household meets the definition or not. If a question about qualifying children comes up you can provide folks with this web address or print out the information on the website and give it to them as a handout. And just remember you re just -- you re
Page 11 providing the access not interpreting it. I do want to point out, kind of an interesting thing about the qualifying child definition as it relates to people with disabilities, is -- is that a child or person with a permanent and total disability does not have to meet the age requirements for the worker that claimed them as a qualifying child. So what that means for example is you could be working with a beneficiary who s an adult and hasn t started working yet but you know their mother who they currently live with is working and barely getting by. Keep in mind that the beneficiary could actually help increase the amount of EITC the family could receive by qualifying as a dependent of mom. What that means is that you, not only want to be on the lookout for beneficiaries who could qualify for EITC based on the fact that they themselves are working but also be on the lookout for beneficiaries who s families might qualify for higher EITC because the beneficiary might still meet the definition of a qualifying child. All right let s move on to slide ten and begin looking at the eligibility criteria for EITC. Now, before I dive into the details of eligibility I do want to reiterate that you re role is to provide general information not to be interpreting how -- how a person fits the EITC criteria specifically. You want to be prepared to refer to trained tax experts around that piece. So given that as I talk through the eligibility criteria just keep in mind what your goal is and the goal here is for you to develop a basic understanding of what it takes to be eligible. So I don t want you to suddenly feel overwhelmed, like oh my God, I m never going to be able to explain what a qualifying child is, right, because that s not your role. The idea is just for you to have a basic understanding of what it takes to be eligible and then with that knowledge you can identify potential EITC candidates, educate them about the basics and get them hooked up with a tax expert to help them file. OK, so with that in mind let s briefly talk through the eligibility criteria. So, to begin a worker needs to file a tax return and they have to have earned income and their adjusted gross income must be below the levels listed on this slide. So you can see there s an income limit you have to fall under, right, because it s a tax credit for people with low to moderate income. And you
Page 12 can see that the income limit differs depending on the number of qualifying children that the family has. For your clarification adjusted gross income, which is what they look at when looking at these figures, is a person s -- it s really an IRS concept and term but it s a person s -- essentially it s their -- their income less a few IRS deductions that s what adjusted gross income is. So if we think back to our scenario person, Jane, who was single and had no dependents, she had $7,800 of earned income for the year, so her income was below the income limit for a single person which was $13,980. Now she did have some reduced SSI checks during the year but SSI isn t considered taxable income so it doesn t -- it doesn t -- it s not included in her adjusted gross income so as a result she -- given her income she meets the -- she s below the income limits for EITC. All right so there s this income limit to it so let s move on to slide 11 and take a look at a few other -- some additional eligibility criteria for EITC. So in addition to the income limits a person must have a valid Social Security number, their filing status can t be married filing separately, they -- they have to be U.S. citizen or resident alien, they can t be filing form -- these forms 2555 or 2555EX, which really is just used for someone who has some foreign earned income, and their investment income must be below $3.200. Now this credit is called the earned income tax credit because to qualify you must have earned income so it s possible that somebody might not have earned income and qualify but that s only if they have -- they re married and are filing jointly and their spouse has something that qualifies as earned income that come in. So, for your reference you can find out all sort of great detailed information about these criteria in the IRS Publication 596, that publication is dedicated entirely to EITC so it has lots of helpful information and you ll see the web address to that publication on -- on this slide, on slide 11. Now since it isn t your role to interpret how EITC applies to a person or to know the fine details about each eligibility criteria you ll find this publication to be really, really, really helpful. If a person asks you a question about EITC and you aren t sure what the answer is you -- you can provide them the publication or help them flip to the page in the publication that would, you know, their question would be answered by. And if the answer to their
Page 13 question can t be found in the publication then that simply means you should be referring them to a tax expert. Now, you may run into a number of questions about what s considered earned income and so what I d love to do is just talk about a bit about the details of -- of what is considered earned income, because that will help you better identify potential candidates for EITC. So let s go ahead shift to slide 12 and look at those details. So, in looking at slide 12 you ll see that in general earned income is basically taxable income that you get from work that includes wages and salaries, tips, and even more uncommon kinds of payments like union strike benefits. Additionally, if you re working with a beneficiary who s retired on disability then taxable benefits that they receive under an employer s disability retirement plan can be considered earned income until the person reaches the minimum retirement age, which is usually the earliest age at which they could have started receiving the pension or an annuity if they weren t disabled. I do want to point out that disability insurance payments that are received from a disability insurance policy that the worker paid premiums on aren t considered earned income and therefore don t help you get EITC. So, if you re working with a beneficiary and they re receiving some kind of a long-term disability benefit and it s through their employer and you aren t sure if it s a disability benefits based on early retirement or a disability benefit based on a disability insurance policy then what you simply need to do, which you ve heard me say it a million times you re going to hear me say it a million times more, is refer them to a tax expert. Someone who can help them think through what specifically are the criteria for a benefit to be eligible for this criterion of earned income. Now, net earnings from self-employment are also considered earned income for the sake of the EITC, so keep that in mind as well. As long as the individual owns and operates a business, they have some kind of -- of profit, some kind of net earnings then that could be a way to be claiming EITC. And lastly, gross income received from a statutory employee is also considered earned income, not something you run into a lot but in case you do.
Page 14 All right let s move to slide 13 and I think what we ll do -- we re going to do is we re going to take a look at what s considered not earned income because I think it helps to see a comparison of the two. Now there s a whole host of things that are not considered earned income and this slide just provides a few of the more common forms of income that you -- you might see that are not considered earned income. So for example, pay received from work as an inmate in a penal institution, pensions, annuities or retirement income, and interest and dividends. The big one you see here Social Security and railroad retirement benefits, so SSDI and SSI are not considered earned income. Unemployment benefits, alimony and child support, welfare, worker s comp, veteran s benefits, the list could go on and on. Now, as you can imagine there are quite a few questions that could come up about a person s situation and whether a particular type of income they have could be considered earned income or not. So, if that happens when you re providing this general information to the beneficiary just remember your role isn t to figure out the answer, don t feel overwhelmed by it instead, you know, you re just going to be referring them. OK, so let s go ahead and turn to slide 14 and look at the final eligibility criteria for EITC and you ll see on this slide there are a few more eligibility criteria that a worker must meet. There s some -- the criteria if you have a qualifying child and then there s an additional set of criteria if you don t have a qualifying child. Now, for those who have a qualifying child then the qualifying child must, of course, meet the age, relationship, residency, and joint return test so there s certain requirements that must be (fit) around qualifying child. Additionally, the child cannot be used by more than one person to claim EITC and lastly the filer can t be a qualifying child of another person so some funny little criteria there. Now if a beneficiary would like more details about any of these criteria you can provide them the IRS Publication 596 which gives some great detail about each one of the criteria, it goes into -- generally there s a page or two about each criteria, goes into some good detail. Now in regard to those who have no qualifying child they must at least be age 25 but under age 65 and that s a really helpful one because you could be working with somebody who s 22,
Page 15 well you don t want to send them anything about EITC if they don t have any children, right, because they re not going to be able to benefit from it. So, between age 25 and under 65, again and this is if there s not qualifying child. They can t be a dependent of another person and they also can t be a qualifying child on another person, and lastly they must have lived in the U.S. for more than half the half the year. Now remember your job is to not know the details about all the criteria, we re sharing all this with you today so that you have this general idea of what s involved in determining eligibility and by knowing this information you re better able to help -- to help beneficiaries you serve identify if they could potentially claim EITC. So the goal here is for you to get this general understanding of what it means to be eligible and to know where to refer folks who want more detail, which we re going to cover in a bit. So before we turn to slide 15 what I d like to do is I want to check in and see if you -- if anybody has any questions so, Operator, I am wondering if you would be able to open us up for a Q&A? +++q-and-a Operator: Ladies and gentlemen, at this time of you d like ask a question over the phone please press star and then the number one on your telephone keypad. We currently have three participants in queue first is the line of (David Mitchell), their line is open. (David Mitchell): Hello, I just wanted to verify that -- that the person who has a qualifying child where they cannot be the -- they do not have a qualifying child, they cannot be the dependent of another person but what if they are the child of a person who is using the earned income tax credit themselves. You said earlier that they re -- it s a first -- if a family has an adult child who is -- has a disability then there s no age limit, so like what if there s an opportunity for the adult child to work and use this earned income tax credit does that mean that those -- so mutual exclusive one -- the parent or the child can use it but not both? Great question, yes, so what they re saying is that EITC can only be claimed on a person once, essentially. So you d want to figure out which is most financially advantageous. So, let s do an example where let s say I am 30
(David Mitchell): Yes, thank you. NORTHROP GRUMMAN SYSTEMS CORPORATION Page 16 years old and I m living at home with my mom and I m experiencing disability and I m working and if I were to file taxes on my own then I would meet the criteria for EITC and I could get up to $475. Now I, because I -- I am -- I experience a permanent and total disability, if I meet their criteria then my mom could claim me as a qualifying child, now if my mom claims me as a qualifying child she could get, what is it, $3,600, $3,900 I forget the exact amount off the top of my head, but it s -- so she could get, yes $3,169 in EITC by claiming me. We have to choose one or the other, you got to pick, either I m claiming on myself or mom is claiming me as a dependent. Did I answer your question, (David)? Operator: Great. Our next question in queue is from the line is (Allyson) -- (Allyson Hoffless) and their line is open. (Allyson Hoffless): Hi, Molly, I just wanted to clarify one slide number 10 where it has the income limits per number of qualifying children does the adjusted gross income-- I believe you mentioned it does not include how much they get from SSI or SSDI, is that correct? Yes, that s a great question; I m going to touch on that a little bit more later but (Allyson Hoffless): OK. SSI is not included in adjusted gross income but Social Security -- Social Security generally is but SSI is not. The welfare benefits like -- so if you ever look at a 1040, and IRS tax return for an individual, you ll see that there s nowhere on there that it asks you to list SSI or (inaudible) or food stamps, right, welfare benefits aren t taxable income to you but there is a place to list Social Security and depending on your income at a certain point your Social Security can be taxable. So it s possible that SSDI would be taken into account but not SSI.
Page 17 (Allyson Hoffless): Thank you. Operator: You bet. And once again ladies and gentlemen to ask a question over the phone star one on your telephone keypad. And ladies and gentlemen -- or and presenters at this time there no questions in queue. Great, super, well thank you both (David) and (Allyson) for those great questions they were fantastic they re really good at helping to think through who s a good candidate and who s not. So, what I d like to do now is have us turn to slide 15 and I want to touch briefly on the concept of state earned income tax credits. So, when you re educating beneficiaries about this whole concept of EITC you want to be aware of whether your state has an earned income tax credit as well. So as you ve learned the federal EITC reduces the amount of federal income tax a person owes and can result, ideally, in a refund. Well some states or local tax governments have created an EITC to reduce the amount of state or local income tax that a worker would owe. Now not all states have an earned income tax credit but you certainly want to know if your state has one or your local area has one. So you can educate beneficiaries about it as well as the federal EITC. So share both, right, at the same time. You ll see on this slide, slide 15, there is a web address to a website that lists the states and local areas that have an earned income tax credit. So this website, you know, I would sort of ask around and double check if your state isn t listed. I always sort of -- it s an IRS website but sometimes state specific information doesn t always make it to these federal websites so, you know, maybe you re in a state that just created an EITC last year or something and it hasn t made it to this website. So be sure to ask around if your state isn t listed here. Currently there are 24 states, which includes the District of Columbia, that have a -- a local earned income tax credit, as well as, New York City and of all things Montgomery County, Maryland. So, if you re in any of those areas you want to make to -- make sure to gather some information about your --
Page 18 you state or local EITC and share that along with information about the federal EITC. All right, now that you have a really strong idea of what EITC is, how it works, and what the eligibility criteria are let s go ahead and turn to slide 16 and look at the details about how an EITC refund impacts benefits. So the great news is that there is new legislation that makes permanent exclusion, for a period of time, of EITC. So for those of you who have been doing this work for more than a year you may remember that in December of 2010 Congress passed the Tax Relief Unemployment Insurance Reauthorization and Job Creation Act of 2010 and that is a mouthful. So section 728 of that legislation included a fantastic and simple exclusion, the language in that legislation provided that federal tax refunds were to be excluded from income for all federally funded programs and, so excluded form income, and excluded from resources for 12 months. Now the down side of that Tax Relief Act of 2010 was that the exclusion was only set to last through December 31, 2012. Well, I m happy to report that this exclusion was just made permanent a few short weeks ago through the American Taxpayer Relief Act of 2012. What that means is that you can let beneficiaries know that claiming an EITC won t count as income for any federally funded benefits and it s going to be excluded from resources for 12 months. So that includes benefits like SSI and SNAP and HUD, now -- now since this law has only been in effect for a couple of weeks most agencies have not, at least from what I ve been seeing, have not modified their policy manuals to reflect these changes. And a lot of policy manuals like Medicaid policy manuals or SNAP policy manuals, even the Palms for SSA, there s still an indication that the exclusion only last through December 31, 2012. So these haven t -- in many cases these policy manuals haven t been modified to reflect this change. Social Security is working, as we speak, on an emergency memo that s going to go out to staff about this. So, I mean there is some effort going on to get things to change but we all know that policy changes can take some time to get in writing. Now, since the IRS began processing tax returns on January 30th that means folks could begin receiving refunds before the policy manuals have been updated at various benefit agencies so you can see how incredibly important
Page 19 you are in this process. It would be so good for you to be on the lookout for any confusion that may arise from this new legislation. I mean given the timing of this you may find yourself in a position in which you re needing to educate benefit agency staff about this really great new change. So be prepared to share -- there s a link on -- on this slide to the bill that has the -- the language about this exclusion and as -- as the policy manual comes out we ll be sure to notify you over the list serve particular we get our hands on that information memo when it gets completed by SSA, that s a really powerful piece of information to share even at the local level. So, be prepared to need to step in and help address issues around this exclusion. All right so we ve covered the main concepts related to EITC and before we talk about where to refer people for tax help I d like to briefly touch on two very common tax questions that come up that aren t related to EITC but are related to people with disabilities. So, let s turn to slide 17 and look at the first, so it s very likely that once you bring up EITC the person you re talking with may ask if their Social Security benefits are taxable. Boy, you know, even if you don t ask -- bring up EITC and that s like as you may find that s a common question that just naturally comes up this time of year. So, I want to give you some basic information that you can provide folks with when that question arises. Now for SSI the answer is simple SSI is not -- not taxable. So SSD -- for Title II disability benefits you can t really say for certain what you can do is you can clarify to a beneficiary that if their other taxable income -- income plus half their benefits exceeds a certain limit which is set each year then their SSDI could be taxable. So essentially you d be saying your SSDI could be taxable if all of your income if high enough. So you re going to want to refer folks to this IRS Publication 907 for more detail on this, pages four and five of that publication and there s the web address for that publication is on this slide. And when you flip there folks will see that there s some steps for figuring out if their Social Security benefits are going to be taxed or not. It s absolutely appropriate for you to share this kind of general information but if a beneficiary begins asking you, you know, help me calculate this to see if my Title II is taxable its really, really important that you hold that line and you clarify that s out of your area of expertise and make
Page 20 sure to get that person hooked up with someone who is a trained tax expert, incredibly important to do which is why I ve repeated it so many times. All right, so let s go ahead and turn to slide 18 and take a look at the second common tax questions that you ll often run into. So, you ll see on this slide the other common tax is that what you may run into is are there any special tax deductions available to me as person with a disability? And the answer is likely yes and there s a whole host of deductions and credits that could benefit a person with a disability or their family. So when that question arises you want to have on hand some brochures or publications that give the details on these deductions and credits and of course have great places to refer people. On this slide you ll see a few links to some great information about all these tax deductions and credits for people with disabilities the -- the first wed address listed is my personal favorite, it s this great two page summary of tax deductions and credits for people with disabilities. And it just -- it hits on the high points and it tells you where to go to get more information and it s not overwhelming and I just think it s really well laid out. The second web address provided is to the IRS web page that s dedicated to tax information to people with disabilities and the third web address provided is to that IRS Publication 907 which is titled Tax Highlights for Persons with Disabilities. So it s really -- that is sort of the -- that s the really comprehensive publication that can overwhelm folks with that publication. Some people, if you were to hand that to somebody they may be like Oh, my word I m not even going to open it, which is why that first brochure listed on this slide is a real helpful one for getting people curious and interested and helping them think it through and then if they have specific questions you can give them the big one 907. All right so now let s go ahead, now that we ve covered those two common questions let s go ahead and turn to slide 19 and now let s talk about where do you refer folks? How can you help folks get hooked up with some assistance in claiming EITC and filing their taxes? So, one of the most powerful resources for you to become familiar with is VITA the Volunteer Income Tax Assistance program. The VITA program offers free tax help for people who
Page 21 have low or moderate income which is generally $50,000 or below who can t prepare their own returns. The VITA program has certified volunteers that are sponsored by various agencies and organization that and -- so that it receives training to prepare basic tax returns in communities all across the country. Now VITA sites are generally located in easy -- kind of easy to access places within your community like neighborhood centers and libraries and schools and they can even be in a shopping mall. Just they try to get placed in convenient locations. The second national and free tax preparation assistance program is the Tax Counseling for Elderly program or TCE program and so this program also provides free tax help it s just targeted to people who are age 60 and older. And again you ve got trained volunteers connected with nonprofit organizations and their providing free tax counseling and help with basic income tax returns and -- but this is for -- for senior citizens. So volunteers who provide tax counseling, in this program, are often retired individuals who are associated with the given nonprofit that receives the grant from the IRS. Now as a part of the -- this IRS sponsored TCE program AARP offers this tax aid counseling program at more than 7,000 sites nationwide during tax season so you may run into the AARPs tax aid counseling program and that s just a part of this IRS sponsored assistance. So, on this slide you ll -- so those are the two main ones that you -- you should feel comfortable with, you should know how to access and share information about. And so on this slide you ll see a link to an IRS web page that helps you locate the nearest VITA or -- or TCE site and you re going to also see listed here phone numbers for both programs in case, you know, you re working with someone and you -- you know, you re not with them and they don t have access to a computer you can just give them the phone number and they can call and find out where their nearest location is. Now you may also find in your community that there are other nonprofit organizations or agencies that have found a little pot of money somewhere and are providing some free tax assistance. So be on the lookout for any and all resources that could be out there above and beyond these two national ones. If you aren t familiar with what s out there though begin with the national
Page 22 ones and then you can just ask around if there s a particular area that you -- your worried in unserved just ask the folks that are providing the service to see if they know of anybody else that maybe doing it. Now in addition to seeking free help in preparing taxes it s also a beneficiary s choice to where they may find themselves not eligible for the VITA or TCE program and so they need to pay someone to prepare their taxes. So, when that occurs then -- then they may ask for some help in identifying the tax expert they could say to you, you know, so where do I go to get my taxes done? Who can I talk to? If that question arises you can provide the beneficiary with a facts sheet that it s listed -- the web address for the facts sheet is on the last link on this slide, which provides some great tips for what a beneficiary should look for in an accountant or when their trying to choose a tax preparer if they re not looking for an accountant. So, that is a great handout to have in the event you re talking to somebody and they -- they don t feel like they can do their taxes on their own. So let s go ahead and turn to slide 21 I just want to hit on a few more tools and resources for folks who are filing on their own. If you re working with someone who -- who s filing on their own it s good to let folks know about the EITC assistant which is a tool designed to help a person figure out if they are eligible to claim the EITC. It also help figure out if their child or children meet the qualifying tests and also provides an estimate for the amount of EITC that they can potentially get. Generally folks who need help filing taxes tend to find this tool a little overwhelming but folks who are going to take on and prepare taxes on their own, who (inaudible) work with a preparer would find this incredibly useful. So you want to have that link readily available to share and for those folks who do end up filing on their own be sure to let them know that they can call the IRS for for phone assistance if they have any technical questions, that I find is really helpful if you re working with someone and they start asking you technical questions, they aren t comfortable looking the information up and they -- they can t access a tax preparer or accountant to suggest they contact the IRS for fee help. And it s also good to be prepared to provide them a link to the IRS website that has all the tax forms and all the means for filing online.