The EITC delivers billions of dollars to millions of low income taxpayers – many of whom rely on the credit to lift them above the poverty line. Between 75 percent and 80 percent of all eligible taxpayers claim the credit. Unfortunately, the EITC also has a high erroneous payment rate. For this reason, the Government Accountability Office (GAO) has placed EITC on its list of high risk programs.
The IRS has adopted a multi-pronged strategy aimed at reducing the EITC erroneous payment rate while maintaining or increasing participation by eligible taxpayers. As part of the strategy, we conducted tests for tax years 2003, 2004, and 2005 to evaluate the effect of a certification requirement both on the level of erroneous payments and participation by eligible taxpayers. Because incorrectly claiming a qualifying child is one of the largest sources of EITC error, we asked a small number of taxpayers (25,000 for each year) to show that they met the EITC residency requirement for their qualifying child before we released the EITC portion of their refunds.
The final results of the first year certification test can be found in the IRS Earned Income Tax Credit Initiative Final Report to Congress, October 2005. The report for the second year of the test will be issued shortly and the final report is expected in early 2008. The IRS has no plans to impose a blanket qualifying child certification requirement until the evaluation of the test, including the effect of certification on error and participation, is completed.
2004 Certification Test
2005 Qualifying Child Certification Test
2006 Qualifying Child Certification Test
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