Taxpayers who misreported their income to snare unjustified Earned Income Tax Credits are draining $2 billion a year from the U.S. Treasury, auditors at the Government Accountability Office recently told Congress.

Another $2 billion a year is being improperly paid out to taxpayers who misrepresent their marital status in order to score EITC payments, and an even bigger drain - $3 billion annually - is being paid to families that collect earned income credits by falsely claiming that they meet federal residency or relationship requirements, the GAO said.

The 30-year-old program, which provides tax credits of up to $4,000 a year to qualified taxpayers, was originally intended to offset the burden of Social Security taxes and provide a work incentive for low-income individuals.

Today, however, families with taxable incomes as high as $34,000 annually can qualify for EITC subsidies, and the Internal Revenue Service has been fighting an uphill battle to curb fraud and abuse within the program.

"Because of the persistently high rates of noncompliance, we also have identified the EITC program as a high-risk area for the IRS since 1995," GAO investigators said in a report to House Ways and Means Oversight Subcommittee chair Amo Houghton, R-N.Y.

Despite these concerns, the report noted that, in government circles, the Earned Income Tax Credit continues to be regarded as "a successful anti-poverty program."

Citing figures released by the President's Council of Economic Advisors, the GAO noted that "an estimated 4.3 million individuals - including 2.2 million children - were lifted out of poverty" because of EITC payments in 1997 alone.

The most recent program figures, however, indicated that nearly one-third of the $30 billion paid out under the EITC program to taxpayers each year is going to people who don't deserve it.

"The IRS's most recent EITC compliance study estimated that between $8.5 billion and $9.9 billion of the EITC claims filed for tax year 1999 should not have been paid," the GAO said in its report. "This amount represents an estimated rate of EITC over-claims - total erroneous claims less any amount that the IRS recovered or expects to recover - of between 27 and 32 percent of EITC dollars claimed."

Three years ago, the IRS commissioner and Treasury officials convened a joint task force to identify ways to reduce EITC over-claims, and although several compliance studies have been performed in the interim, the GAO said that "IRS officials do not think EITC compliance has improved substantially since then."