A federal program aimed at helping to lift the poor out of poverty is getting a boost Jan. 1, when all California employers will be required to inform their workers that they may be eligible for the free funds.

As part of the new law, written notices about the Earned Income Tax Credit must be provided to all California employees within one week or at the same time they receive their W-2 earnings form or 1099 forms for independent contractors.

The earnings forms are given to employees in mid- to late January and are used to file federal and state tax returns.

Advocates of the new law say the letters go a long way toward raising awareness about a program that is designed to benefit lower-income families by providing them with up to $4,000.

The problem is that the program is sometimes overlooked or misunderstood by those who qualify.

State officials estimate that nearly 500,000 Californians who were eligible in 2005 did not claim the EITC and lost out on $850 million in federal money. In Fresno, $26.4 million went unclaimed that same year.

"What we are trying to tell people is that it is in their best interest to file for this," said David Ford, chief of staff for Assembly Member Ted Lieu, D-El Segundo, author of the new law. "It is as simple as you send the government a piece of paper and they send you money."

Nonprofit organizations and local governments are encouraged by the new law, saying the funds are needed to help working families.

The amount of EITC payment varies based on the taxpayer's income and number of qualifying children. As an example, a person's adjusted gross income must be less than $37,783 ($39,783 if married filing jointly) with two or more qualifying children to receive the maximum benefit of $4,716.

"That is money that could go directly back into people's pocketbooks or into a savings account or to help with a down payment. It's also money that could go back into our economy," said Fresno City Council Member Henry T. Perea. "I think it is important that government, business and nonprofits do everything they possibly can to make people aware."

Employer groups have begun fielding calls and e-mails from members about the new law and how to comply.

Scott Hauge, founder of the San Francisco-based Small Business California, has received about 30 e-mails in the past several days.

"We think it is a great program. But this becomes one more thing that employers have to do," Hauge said. "We also don't like the idea that the distribution system of information has become the employer."

Hauge said that employers must send letters out to all of their employees, whether they qualify or not.

"Even the guy who is making a half a million dollars will get a letter. Everyone does," Hauge said.

Included in the letter must be information that the EITC has no effect on certain welfare benefits and that in most cases the EITC funds will not be used to determine eligibility for Medicaid, Supplemental Security Income, food stamps, low-income housing or most temporary-assistance programs for needy families.

Those with questions about the EITC can contact the Internal Revenue Service by phone at (800) 829-3676 or visit its Web site at www.irs.gov.