As an employer, which tax credit must you inform employees about if they have no income tax withheld?

The Earned Income Credit (EIC) is a federal tax credit specifically designed to benefit low to moderate-income working individuals and families, particularly those with children. If employees have no income tax withheld, it is essential for employers to inform them about this credit because it can significantly impact their financial situation, often resulting in a refund on their tax returns, even if they do not owe any taxes.

The EIC is a refundable credit, which means that if the amount of the credit exceeds the taxes owed, the taxpayer can receive the difference as a refund. Therefore, it is beneficial for employees to be aware of their eligibility for this credit, especially if they are not seeing any withholding on their paychecks.

In contrast, the other options do not directly relate to the necessity of informing employees with no income tax withheld. The Child Tax Credit is dependent on having qualifying dependents and can be affected by income levels but is not specifically tied to withholding. The Standard Deduction applies to reducing taxable income rather than being a form of credit. Tax Exempt Status relates to exemption from federal income tax for certain organizations or individuals but does not relate to informing employees about potential credits available to them.