What must an employer inform employees about who have no income tax withheld?

An employer must inform employees with no income tax withheld that they may be able to claim a tax refund as Earned Income Credit (EIC). The Earned Income Credit is a beneficial tax incentive designed to provide financial relief to low-to-moderate-income workers and families. It allows eligible individuals to receive a tax refund even if they owe no federal income tax or have not had any taxes withheld from their paychecks throughout the year.

This information is crucial because it encourages eligible employees to file their tax returns to take advantage of potential refunds they are entitled to due to the EIC. Many individuals may not be aware that they qualify for this credit, and informing them can significantly impact their financial situation positively.

The other options present various misconceptions about taxes. For instance, applying for a tax credit or being exempt from all taxes does not accurately reflect the entitlements or responsibilities of those with no withholding. Additionally, while they might have a tax liability at year-end depending on their overall income and circumstances, asserting that they will owe taxes is not universally true and does not consider opportunities for tax credits and refunds.