New Earned Income Credit Requirements to Verify Eligibility

In theory the Earned Income Credit is a commendable idea.  The Earned Income Credit is meant to assist those whose income is below a certain level with a tax refund "bonus" and on the face of it that is what it has done.

The problem has been the enormous amount of fraud that the program has engendered. 

There are many situations where a married couple, who have lived together all year, have chosen to have one spouse file head of household, claim the children and receive a great deal more refund than they would have if they had filed married, joint.  This enables the spouse to appear to be a single parent with little income and therefore receive a hefty Earned Income Credit. This is fraud but it is also common.

The other consideration is that many individuals who are living together have literally chosen not to marry because it would make such a large difference in their refund. In our view, tax law should definitely not be legislated in such a way that it discourages two individuals who otherwise would marry from doing so.

IRS has been given a very difficult, if not impossible, enforcement problem and they have tried tactic after tactic in their attempt to minimize the amount of taxpayer dishonesty in regard to the Earned Income Credit Program.  The latest bulletin from the IRS, released last week, has stated that all tax preparers who prepare returns that include the EIC must also send  Form 8867 along with the tax return. Form 8867 is basically a checklist showing that the taxpayer does indeed fulfill all the qualifications necessary to claim the Earned Income Credit. 

The IRS is also attempting to identify tax preparers who are "at risk" in preparing returns with EIC "errors." For this reason, tax preparers who frequent tax preparation companies that habitually cheat on the Earned Income Credit should be wary because many of these shady tax places will face increased IRS scrutiny and can expose clients to risk of IRS audit.

Both of these approaches are a continuation of the IRS’s attempt to sway those who would be tempted to choose to file an incorrect or fraudulent claim for the Earned Income Credit.