Washington (Aug. 6, 2003) -- The Internal Revenue Service will launch the Earned Income Tax Credit certification pilot program in early 2004.

The new pilot program will allow the IRS to use an integrated approach to address potential erroneous claims by identifying cases that have the highest likelihood of error before they are accepted for processing and before any EITC benefits are paid.  The General Accounting Office has identified EITC as a “high risk” area for the government because of the high rate of erroneous payments.

The announcement of the EITC certification program on June 13 included a 30-day comment period that ended in July. After reviewing the comments, the IRS is incorporating a number of suggestions by tax practitioners, social welfare groups, the general public and others.

“The EITC program helps lift millions of working families, especially single mothers, out of poverty each year. But it has consistently been found to have an erroneous payment rate higher than many other government benefit programs. To protect the long-term viability of this critical program, we must ensure those who qualify receive the credit they are due - but only those who qualify,” IRS commissioner Mark W. Everson said. “After reviewing many constructive public comments, we have identified a number of steps we can take to improve the certification pilot and strengthen the integrity of the EITC program.”

To make the changes, the IRS will start the program in the 2004 filing season. The IRS will ask 25,000 EITC claimants to certify when they file that the eligible child claimed for EITC purposes resided with them for more than half a year as required by law.

In addition, the IRS also said it would expand efforts to discover erroneous payments to taxpayers who underreport income to claim the credit. Next year, the IRS will expand its compliance efforts involving at least 300,000 taxpayers who claim the credit but failed in the past to report all of their income. These taxpayers may not be eligible because the EITC has an income cap. This group will also include EITC claimants who misrepresent their filing status.

-WebCPA staff

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