Earned Income Tax Credit: Great, but Where Is It?

by Tom Yamachika, President Tax Foundation Hawaii

A few years ago, in 2017 to be exact, our lawmakers enacted an Earned Income Tax Credit (EITC), which then was touted as a truly wonderful way to deliver tax relief to working families.

If it is properly claimed, that is.

One alert reader, in a Star-Advertiser letter to the editor, wondered out loud how people are supposed to figure out how to claim the credit…and with good reason. So, we are going to walk through the return and give you some spoilers.

Most working families in Hawaii, and any that would qualify for the EITC, would need to file Form N-11, which is the Hawaii income tax returns for residents of this state. The form, however, does not mention earned income tax credit. At all.

Going to the instructions for Form N-11 doesn’t help much. The form mentions “earned income tax credit” in a couple of places, both while talking about other things. It does not tell you how to claim this credit.

So, where do you even put down a number for the Hawaii earned income tax credit once you figure out what the number is?

Here’s the spoiler! It goes on line 35, which says, “Total nonrefundable tax credits (attach Schedule CR).”

Okay, so we now know that we need to pull another form, called Schedule CR, to claim the EITC.

Where do we find this form? If you look through the Department of Taxation’s website and look through all the forms starting with the letter N (which is a logical place to look because that’s where you would find Form N-11 and its instructions), you won’t find it.

Spoiler: Look through the Department’s website under “Tax Forms Beginning with S.” Because “Schedule CR” starts with S.

Okay, now we have Schedule CR. Where on the form does it mention the EITC? Well, it doesn’t.

Off to the Schedule CR instructions we go. Aha! There is indeed something that mentions the EITC. It says that the EITC amount is reported on Line 25, and that you will need to attach Form N-356.

On Schedule CR itself, line 25 simply says, “Attach Form N-356 (N-11 and N-15 filers only).” But alas! There are three different columns on line 25. Column (a) says, “Total New Credit Claimed for this Tax Year.” Column (b) says, “Total Credit Applied to this Tax Year.” Column (c) says, “Unused Credit to Carryover to Next Tax Year.”

Fortunately, once you pull Form N-356 and get through both pages, the form will tell you how much to put in Columns (a), (b), and (c).

So, here’s the ultimate spoiler: To claim the EITC, you need to pull Form N-356 and Schedule CR, and you need to attach them both to your income tax return.

To those of you who want to claim the EITC and you (or your tax preparer) have found this article: Congratulations! Now you know what forms to pull and where the amounts from the forms go to.

For those you who want to claim the EITC and you (or your tax preparer) have not found this article: Good luck! You’re going to need it.

And, if you’re a lawmaker or you’re at the Department of Taxation, you might want to consider making this credit easier to find so the working families that we want to help at least have a fighting chance at getting this relief.