Washington (June 16, 2003) -- Internal Revenue Service Commissioner Mark W. Everson has announced steps designed to both improve service to Earned Income Tax Credit eligible taxpayers and to reduce erroneous claims by taxpayers who do not meet the eligibility standards established by Congress. During his confirmation process and in recent testimony before Congress, Everson pledged to enhance the IRS's service to taxpayers and to review a proposal in the President's budget to strengthen compliance in this area.

The EITC provides low-income taxpayers with a refundable credit. Approximately 19 million taxpayers claimed over $32 billion of such credits on tax year 2002 returns. However, a recent study indicated that between $8.5 billion and $9.9 billion (27 percent to 31.7 percent) in EITC claims was paid erroneously in tax year 1999. The General Accounting Office has concluded that the EITC will remain one of the government's "high risk" programs until the IRS designs and implements effective controls to deal with noncompliance and erroneous refunds in the billions of dollars.

The five-point EITC initiative announced by Everson is intended to reduce the backlog of pending EITC examinations; minimize the burden and enhance the quality of communications with taxpayers by improving the existing audit process; encourage eligible taxpayers to claim the EITC by increasing outreach efforts; ensure fairness by refocusing compliance efforts on taxpayers who claimed the credit but were ineligible because their income was too high; and pilot a re-certification effort to substantiate qualifying child residency eligibility for claimants whose returns are associated with a high risk for error.

Henry Lamar, wage and investment commissioner, will lead the effort in close coordination with national taxpayer advocate Nina E. Olson.

"This is a balanced initiative aimed at providing better service to taxpayers and improving the integrity of this important benefit program," said Everson, who recently completed a review of the EITC program and toured the IRS's EITC operations in Atlanta. Everson noted that under the refocused certification pilot, taxpayers will not have to establish their relationship with the qualifying child as had been previously proposed.

-- WebCPA staff

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