Working Families Tax Credit (WFTC) draft rule summary

The Working Families Tax Credit (WFTC) is a new program that allows eligible applicants to receive a refund of sales or use tax that they had previously paid. The purpose of this program is to stimulate local economic activity, advance racial equity, and promote economic stability and well-being for lower-income working people. The refund amount is based on income and the number of qualifying children that an applicant may have.

This page provides a general summary of the proposed rule and its contents. For additional detail and explanation, please review the proposed rule that may be found here.

If you have any comments or feedback on the proposed WFTC rule (WAC 458-20-285), please send your comments or feedback to ChelseaB@dor.wa.gov.

We also welcome you to attend the public hearing for the proposed WFTC rule. The public hearing is your opportunity to give testimony on the proposed WFTC rule. The Department will consider this testimony as it moves forward with rule adoption.

The public hearing will be held via MS Teams on June 21, 2022 at 2:00pm PT. Click this link to attend the public hearing. 

To request special accommodations or language services, please email DORMultilingual@dor.wa.gov prior to June 10, 2022.

If you have any questions on how to attend the meeting, please contact AtifA@dor.wa.gov for login/dial-in information.

Learn more about the rulemaking process or how to participate in the rulemaking process.

Part 1: Eligibility Requirements

Valid Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN)

For more information on WFTC eligibility requirements, please look to the proposed WFTC rule.

  1. What is required?
    You, your spouse, and/or your qualifying child(ren) must have either a valid SSN or a valid ITIN.
  2. Valid SSN
    Your SSN must be valid for employment and issued before the due date of the federal income tax return you plan to claim the federal earned income tax credit.
  3. Valid ITIN
    Your ITIN cannot be expired.
Properly File a Federal Income Tax Return
  1. What is required?
    You must file your federal income tax return with the federal government and you must attach a copy of your filed federal income tax return to your WFTC application.
  2. What is a properly filed return?
    A properly filed federal income tax return is a federal tax return that fulfills all of the requirements for the federal government to be able to process it.
  3. Do I need to claim the federal earned income tax credit (EITC) to be eligible?
    No, your federal income tax return must show that you are generally eligible to receive the federal earned income tax credit, but you do not actually claim it.

For more information on WFTC eligibility requirements, please look to the proposed WFTC rule.

Federal earned income tax credit (EITC) eligible
  1. What is required?
    You must be eligible to receive the federal EITC, with the only exception to this being that you may have either a valid SSN or a valid ITIN. This means that even if not all members of your family have a valid SSN, you or members of your family may have either a valid SSN or valid ITIN to claim the WFTC refund.
  2. Federal Income Thresholds
    You (and your spouse if you are filing under the married filing jointly status) must be below the income limits set by the federal government for EITC eligibility. The federal income thresholds are based on your adjusted gross income (AGI) which is on your federal income tax return. The federal income threshold amount depends on your filing status and the number of qualifying children you have.
  3. Other federal EITC requirements
    To be eligible for the federal EITC, you must also fulfill these requirements:
    1. You did not file a federal Form 2555, Foreign Earned Income, with your federal income tax return;
    2. Your investment income (income received from interest, dividends, capital gains, royalties, rental income, or other passive income) cannot exceed $10,000, which may be adjusted by the federal government for inflation in later years];
    3. You, your spouse, and your qualifying children are U.S. resident aliens or U.S. citizens; and
    4. iv. You cannot be prohibited from claiming the federal EITC due to reckless or intentional disregard or due to fraud.

For more information on WFTC eligibility requirements, please look to the proposed WFTC rule.

Residency
  1. What is required?
    You must have been physically present and resided in Washington for at least 183 days during the year for which you are claiming the WFTC refund.
  2. What does it mean to be “physically present” and “reside” in Washington?
    To be “physically present” means that you are in or located within the state of Washington. To “reside” in Washington means that you have your home or residence in the state. Individuals who commute to Washington (e.g., for work) do not “reside” in Washington.
  3. Residency for Spouses
    If you are a Washington resident, but your spouse is not a Washington resident, and you and your spouse file under the federal married filing jointly status, then you and your spouse still meet the residency requirement.
  4. Individuals/Families experiencing homelessness
    If you are experiencing homelessness, you may still be considered a Washington resident. If you are asked to prove your Washington residency, you have the option to provide a letter from a community-based organization, public benefits caseworker, or other organization/program that states the organization:
    1. Can identify you,
    2. Confirms that you were physically present and resided in a particular area(s) in Washington (can be a specific area or a more general area such as a town, city, or county), and Confirms that you have were physically present and resided in this area or areas in Washington for at least 183 days.
  5. Citizenship
    An individual’s citizenship or visa status is not considered in determining WFTC residency.
  6. How to document residency
    You do not need to provide residency information with the WFTC application itself. However, if the Department has questions and asks you to prove your Washington residency, then you will be required to provide documentation which may include, but is not limited to, the following items:
    1. Washington driver’s license,
    2. Washington ID card,
    3. Utility bills,
    4. Landlord statements,
    5. Rental agreement or lease,
    6. Mortgage statements,
    7. Public benefits verification letters from state or federal agencies or case worker statements,
    8. Community-based organization letters or statements, or
    9. School records

If you are unable to provide any of these documents, then you must contact the Department to determine if there are any other documents you may use to prove your residency, which the Department may allow at its discretion. For more information on WFTC eligibility requirements, please look to the proposed WFTC rule.

Sales or Use Tax Paid
  1. What is required?
    You will be expected to attest that you have paid sales or use tax during the year in which you are claiming the WFTC refund on the WFTC application under penalties of perjury.

For more information on WFTC eligibility requirements, please look to the proposed WFTC rule.

Part 2: Application Process

When is the WFTC application due?

A complete WFTC application must be provided to the Department by the application due date. Due Date: December 31st in the calendar year following the tax year for which you file your federal income tax return.

If December 31st falls on a Saturday, Sunday, or Holiday, the due date is the next business day.

Example: If you are requesting a WFTC refund based on your 2022 tax year information, then the WFTC application and all other attachments are due on January 2, 2024 (December 31, 2023 is a Sunday and January 1, 2024 is a holiday, so the next business day is January 2, 2024).

For more information on the WFTC application process, please look to the proposed WFTC rule.

What additional items do I need to include with my WFTC application?
  1. A copy of your filed federal income tax return, and
  2. Proof of your identity:
    1. Only required of the applicant
    2. Must be a government or tribal-issued photo ID – examples are provided in the proposed WFTC rule.
    3. If you are unable to provide proof of your identity, then you must contact the Department to determine if there are any other documents you may use to prove your identity, which the Department may allow at its discretion.

For more information on the WFTC application process, please look to the proposed WFTC rule.

What is a “complete” WFTC application?

Your “complete” WFTC application includes:

  1. A filled-out and signed WFTC application (if you are married filing jointly filing status on your federal income tax return, then your spouse must also sign)
  2. A copy of your filed federal income tax return, and
  3. A copy of your photo ID card.

If you do not provide all of this information, then your WFTC application will not be considered “complete.” If your WFTC application is not complete by the December 31st deadline, then the Department will not be able to process your WFTC refund and may deny your WFTC application.

For more information on the WFTC application process, please look to the proposed WFTC rule.

Filing the WFTC application
  1. If filing by mail, your WFTC application must be postmarked on or before the application due date.
  2. If filing electronically, your WFTC application must be received by the Department on or before the application due date.

If you fail to meet these deadlines, then the Department must deny your application absent good cause. For more information on the WFTC application process, please look to the proposed WFTC rule.

Part 3: Refund Amount

Maximum and minimum refund amounts

The maximum credit amount depends on how many qualifying children you have:

  1. No qualifying children: $300 maximum refund
  2. One qualifying child: $600 maximum refund
  3. Two qualifying children: $900 maximum refund
  4. Three qualifying children: $1,200 maximum refund

The maximum credit may be decreased depending on your income, but if you are eligible for the WFTC refund and you are entitled to receive at least one cent or more, then you are entitled to a minimum refund amount of $50.

For more information on the WFTC refund amount, please look to the proposed WFTC rule.

Calculating your WFTC refund

The Department will use your federal income tax return to calculate your WFTC refund.

The calculation will start with the adjusted gross income (AGI) that you reported on your federal income tax return. If your AGI is the same as or more than the amount the federal government allows for federal EITC eligibility purposes, then you do not qualify for the WFTC refund. If your AGI is below these amounts, then you are eligible.

These federal income thresholds are then reduced for the WFTC refund calculation. The reduction amount depends on the number of qualifying children you have.

For more information on how to calculate your WFTC refund amount, please look to the proposed WFTC rule.

Qualifying child
  1. Who is a qualifying child?
    A natural person that is a qualifying child for federal tax purposes that meets the following tests:
    1. Relationship test – the child must be:
      1. Your child or grandchild, or
      2. Your brother, sister, stepbrother, stepsister, or any descendent of such relative
    2. Residency test – the child must have lived with you for more than half the year
    3. Age test – the child must be younger than you (and your spouse) AND:
      1. Is not yet 19 years old, or
      2. Is a student no older than 24 years old, or
      3. Is permanently and totally disabled (regardless of their age)
    4. Joint return – the child did not file a joint tax return with their spouse
  2. Who can claim a qualifying child?
    The proposed WFTC rule provides a hierarchy of rules for determining who may claim a qualifying child. The proposed WFTC rule also provides several examples of how those rules work.

For more information on the WFTC refund amount and qualifying children, please look to the proposed WFTC rule.

Amending your WFTC application
  1. If you made a mistake on your WFTC application or if the IRS makes changes on your federal income tax return, then you need to amend your WFTC application. You may also amend your application if you realize that you should have received a larger WFTC refund.
  2. If you need to amend your WFTC application, you must do so within four years beginning with the calendar year for which the refund is being claimed.

For more information on how to amend your WFTC application, please look to the proposed WFTC rule.

Part 4: General Administration and Review

Department review of WFTC applications
  1. The Department may review all WFTC applications that are submitted, and if it finds that a WFTC refund has been overpaid, then it may assess the overpaid amount against the applicant within four years after the close of the calendar year for which the WFTC refund is being claimed.
  2. If you disagree with a Department decision, you may request an administrative review of that decision. Your request must be made within 30 days of the date the Department issued the decision. To request an administrative review (or informal review) you must file a petition with the Department. Once your petition is received, you will have the opportunity to provide additional documents and explain your position. After the Department reviews your claim, it will issue a final determination.

For more information on the Department’s review of WFTC applications, please look to the proposed WFTC rule.

Paying back WFTC overpayments
  1. It is possible that some applicants may receive larger refunds than they are entitled to and their WFTC refund was overpaid. If this WFTC overpayment is not paid in full by the due date on the notice, the Department will assess penalties and interest. Interest and penalties will not accrue for six months after the notice of overpayment has been issued.
  2. The proposed WFTC provides a timeline of how the penalties and interest are assessed.
  3. In certain circumstances, the Department may also impose a fraud penalty, which is a penalty of 50% of the WFTC overpayment amount in addition to any other applicable penalties.

For more information on paying back WFTC overpayments, please look to the proposed WFTC rule.