In December 2003, the IRS sent a notice to 25,000 taxpayers who had claimed the EITC with qualifying children in 2003. The taxpayers were selected at random from a subset of the overall population of EITC claimants in 2003. This subset was composed of EITC taxpayers for whom the IRS is unable to verify – either through existing databases or statistical analysis – that the taxpayers were likely to have lived with the qualifying children they claimed for more than half of the tax year. The taxpayers were asked to certify they met this residency requirement by sending, with their tax returns, documents supporting their claim. The IRS withheld the EITC portion of the taxpayers’ refunds until we reviewed and accepted the documentation the taxpayers provided.
Test Results: The results of the first year certification test can be found in the IRS Earned Income Tax Credit Initiative Final Report to Congress October 2005. Data from the test shows some significant effects. Specifically, compared to their counterparts who were not asked to certify, fewer taxpayers claimed the EITC, fewer taxpayers claimed the EITC with qualifying children, and fewer qualifying children were claimed. In each case, the differences between taxpayers in the test and similar taxpayers who were not asked to certify were significant.
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