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Income Taxes for Low Wage Workers

Authored By: Northwest Justice Project

Information about who qualifies for the EITC, where to get help filing your taxes and general information about taxes and low wage workers.

Contents
Q & A Related Resources

Q & A

What is the Earned Income Tax Credit (EITC)?

The EITC is money the government gives people who earn less than $40,402 (if they have at least one qualifying child) or $15,310 (no qualifying child) in tax year 2018. Married couples filing jointly qualify if they earned less than $46,102 (if there is at least one qualifying child) and $21,000 (no qualifying child) in tax year 2018. The qualifying amount is based on the number of children, if any, you support. The children you list must have lived with you all year for you to claim them.

*You may be entitled to the Earned Income Tax Credit even if you do not owe any federal tax.

For more info on the EITC, call the IRS at 1-800-829-1040 or visit  http://www.irs.gov/Individuals/Preview--EITC-Income-Limits.

What is a W-4?

Each time you start working for an employer, the employer should give you a tax form "W-4" to fill out. The employer must take a deduction from your pay based on the info you give on the form about how many dependents you have. If you did not earn enough money last year to have to pay taxes and you do not expect to earn more this year, fill in the box labeled "Exempt" to keep tax money from being withheld from your wages.

What is a W-2?

At the start of each calendar year, each of your employers should mail you a form "W-2."  You should file this form with your income tax return. It shows

  • how much you earned

  • how much was deducted from your pay for taxes

What is an independent contractor?

Your employer might give you a form "1099" showing your earnings instead of a W-2 form. This means they are treating you as an "independent contractor" instead of an "employee" for tax and other purposes.

This publication focuses on the rights of "employees." Some employers wrongly call their workers "independent contractors" to try to avoid employment laws. Independent contractors have very few labor rights. If you are being treated as an independent contractor, ask yourself:

  • Have I been given instructions about how to do my work, or do I use my own methods?

  • Am I just a worker, or do I have any investment in the business?

  • Do I simply get a paycheck, or do I have a chance to earn a profit?

  • Does my employer cover my business expenses, or do I pay them?

  • Do I work for only one employer, or do I perform similar services for several employers?

  • Is my work basically unskilled, or do I have a special skill that I use at work?

  • Can I be fired, or do I keep my work as long as I meet the specifications of a contract?

  • Is my work an integral part of the business, or do I perform a specialty job that may be short-term?

"Yes" to the first half of each question above means you are probably an employee. "Yes" to the second half means you might be an independent contractor.

These are only some of the factors used to determine which you are. If you think you are being wrongly called an independent contractor and are not getting the rights or benefits you should have as an employee, contact the IRS.

*If your employer files an incorrect form W-2 or does not file any proof of your employment, it can affect your getting Social Security benefits when you retire. Find out from Social Security if your wages are being reported to them.

How do I find free and local tax filing help?

To find a free and local tax filing service, call 2-1-1 or search online: 

Last Review and Update: Jan 25, 2018
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