A bipartisan group of senators has written a letter to Treasury Secretary Paul H. O'Neill complaining of the IRS policy of not informing lower income taxpayers of their eligibility to claim a portion of the Child Tax Credit as a refundable credit.
According to the group, in 2001 there were 611,560 U.S. households that were eligible but failed to claim a Child Tax Credit, and nearly 75 percent of those households earned less than $25,000 for the year. The Child Tax Credit amounted to $600 per eligible child in 2001. Certain taxpayers are eligible to claim a refund for the credit even if the credit exceeds their tax for the year.
The group criticized the IRS for not contacting taxpayers and helping them claim their refund. "We expect the Department of Treasury to ensure that the benefits of these tax cuts are realized by those families most in need," said the members of the House Ways and Means Committee earlier this week in a news release.
"It's a waste to have tax credits a lot of people miss," said Senator Charles Grassley, ranking member of the Senate Finance Committee. "This makes me wonder how many other tax breaks low-income taxpayers qualify for but don't claim because they aren't aware of them. The IRS needs to do a lot better job of spotting oversights in the taxpayers' favor. The IRS should reach out and let working families know about the tax breaks available to them, including the tremendous tax benefits that President Bush signed into law last year."
The IRS responded that going after taxpayers who don't take full advantage of the tax laws that can help them would set a precedent with "the potential of obligating the Service to send notices to taxpayers potentially eligible for any statutory credit in order to prevent disparate treatment."
The IRS did however agree to send fliers to those taxpayers who are potentially eligible for the Child Tax Credit. The fliers will explain the credit and provide information on how to apply for it. The IRS will begin sending fliers next month, according to Pam Olson, assistant treasury secretary for tax policy for the Department of Treasury.