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State Earned Income Tax Credits

Many states have state-level Earned Income Tax Credit (EITC) programs. Most state EITC is calculated as a state-defined percentage of federal EITC with a maximum benefit limit.

To define state EITC for advanced EITC, an accumulator called SP_EICSTAT (State Adv Earned Income Credit) enables these calculations, and tax codes, and employee tax details complete the setup. Before defining state EITC for an employee, the SP_EICSTAT accumulator and EIC tax codes need to be activated for the company and the specific state.

The system has standard EITC tax codes for the following states. States are listed by name, followed by the standard tax code for that state's EITC:

• District of Columbia (DC), DCEIC  
• Delaware (DE), DEEIC
• Iowa (IA), IAEIC
• Illinois (IL), ILEIC
• Indiana (IN), INEIC
• Kansas (KS), KSEIC
• Louisiana (LA), LAEIC
• Massachusetts (MA), MAEIC
• Maryland (MD) MDEIC
• Maine (ME), MEEIC
• Michigan (MI), MIEIC
• Minnesota (MN), MNEIC.  Per employee on the Employee Tax Detail for MNEIC, the percentage needs to be entered in the Percentage field, and the variable credit needs to be entered in the Credit field.
• North Carolina (NC), NCEIC
• Nebraska (NE), NEEIC
• New Jersey (NJ), NJEIC
• New Mexico (NM), NMEIC
• New York (NY), NYEIC
• Oklahoma (OK), OKEIC
• Oregon (OR), OREIC
• Rhode Island (RI), RIEIC
• Virginia (VA), VAEIC
• Vermont (VT), VTEIC
• Wisconsin (WI), WIEIC. The credit amount for WI EIC is based on a percentage that varies per employee, and the corresponding credit amount for each is defined in SP_EICSTAT.

Note:  Washington state is not one of Mangrove’s new EIC tax codes because the Washington Working Families Credit does not affect payroll tax processing. Washington state has no state income tax, and its credit program is administered by applying directly to the state for the credit.

State EIC Setup

1. Verify that the state EIC payroll accumulators is Active:  SP_EICSTAT.
2. Verify Tax Codes for state EIC. The standard codes for this begin with the state code and end with EIC. Verify the wage limits are the current year's amount. Add additional Tax Codes for EIC as needed for multi-company systems.
3. Verify federal advance EIC tax detail records.
4. Add/edit state EIC tax detail records.

Define State EIC per Company

Verifying company setup for state EIC. To enable assigning state EIC, complete the following.

1. Activate the SP_EICSTAT payroll accumulator.
2.  Activate the per state Tax Codes for EIC for the states that the organization is authorized to remit state income tax withholding.

1. On the Tax Codes table, locate the state-specific EIC code using the Browse List.
2. Select the Company and select the Active checkbox.
3. Confirm that the process sequence for the state EIC tax codes is a greater number than the process sequence number for the federal EIC tax codes.
4. For multi-company systems, add additional Tax Code records as needed.

Assign State EIC to an Employee

To assign state-level EIC for an eligible employee, complete the following.

1. Confirm federal EIC is already assigned to the employee. Note the process sequence number.
2. Add an Employee Tax Detail for the appropriate state-level EIC code for the company.

1. Confirm the process sequence number on the state-level is greater than the process sequence number on the federal EIC tax detail.
2. For all states except Minnesota and Wisconsin, leave the Additional Percentage as 0.00, and leave the Credits field blank on the detail.

For Minnesota, enter the tax percentage of federal EIC in the Additional Percentage field, and enter the corresponding maximum benefit in the Credits field.

For Wisconsin, enter the tax percentage of federal EIC in the Additional Percentage field, and leave the Credits field blank.

3. Define the begin and end date based on the information from the per state paperwork for state EIC.
4. Leave the Process Payroll 1 through 5 checkboxes selected.
5. Save.
6. Optionally, scan the state EIC form and attach it to the employee's online Employee Tax Detail for the state EIC.

Note: If a current federal EIC Employee Tax Detail has a process sequence number of 52 and if the state EIC employee tax detail has a process sequence number of 55, the state EIC can process as needed. However, if the federal EIC tax detail has a sequence number after that of the state EIC tax detail, the state EIC won't process for the employee.