California FTB Launches New Wave of CalEITC “Nudge Letters”

The California Franchise Tax Board (FTB) has announced the next phase of its targeted outreach campaign, sending “nudge letters” to Californians who appear eligible for the California Earned Income Tax Credit (CalEITC) and related refundable credits—but who have not yet claimed them.

This effort, beginning mid-July 2025, is designed to close the gap between credit eligibility and actual participation—particularly among part-time workers, gig economy earners, and non-filers.

What’s in the Letter?

The letters will notify taxpayers that they may qualify for:

• California Earned Income Tax Credit (CalEITC)

• Young Child Tax Credit (YCTC)

• Foster Youth Tax Credit (FYTC)

  
  

Recipients will be instructed to either:

• File a return for the current or prior year

• Amend a prior return to include Form 3514 (California Earned Income Tax Credit) and claim credits retroactively

  
  

The FTB has stated that eligibility indicators are based on prior-year tax return data or reported income from state agencies.

Why This Matters for CPAs and Tax Professionals

This is more than just outreach it's a compliance and planning opportunity.

Here’s how:

1. Amended Return Opportunities

Clients who failed to file or filed incorrectly may be entitled to thousands of dollars in refundable credits. Prior-year returns (e.g., 2022, 2023) may be amended to claim missed benefits.

2. Proactive Client Engagement

Tax professionals should identify and reach out to clients who:

• Earn under ~$30,000

• Work part-time or seasonally

• Have young children or aged out of foster care

• May not have filed at all in recent years

  
  

3. Alignment with Federal Filing Strategy

Because the CalEITC mirrors elements of the federal EITC, filing strategies for one often affect eligibility for the other. This creates coordination opportunities between federal and state credit optimization.

2024 Eligibility Reference (California)

Credit	Max Value	Eligibility Highlights
CalEITC	~$3,529	CA resident, earned income under ~$30K
YCTC	$1,117	Child under age 6, eligible for CalEITC
FYTC	$1,117	Former foster youth (age 18–25), eligible for CalEITC

Actual values vary based on filing status, dependents, and income.

What’s Next

California’s continued investment in direct outreach underscores a broader trend in tax administration: behavioral nudging + refundable credits = higher equity and participation.

For CPAs, this is a chance to deliver immediate value by:

• Reviewing prior-year returns

• Identifying overlooked credit eligibility

• Helping clients file with confidence—and secure the refunds they’re owed

See how Bizora can help!