IRS Backs Off Plan For EIC Pre-Certification | AccountingWEB

IRS Backs Off Plan For EIC Pre-Certification

Less than a month after announcing a new plan to require proof of eligibility for certain recipients of the Earned Income Credit (EIC), the Internal Revenue Service has stated it will postpone the plan for at least 30 days. The IRS plans to schedule a public comment period before moving forward with the pre-certification program.

The EIC is an assistance program for low-income working people. Taxpayers are eligible for the EIC if they have income beneath a certain threshold. Low-income taxpayers with children qualify for a greater credit. There are many reported instances of taxpayers claiming they have a child who qualifies them for the credit when in fact they do not, or claiming that the child lived with the taxpayer for more than six months when in fact that did not occur.

In order to curb cheating, the IRS wants to require certain EIC recipients to pre-certify, or provide proof of their eligibility to claim the credit before they actually file their tax return.

Opponents to the plan have argued that the pre-certification process would be such a burden that it would deter some taxpayers who are truly eligible for the EIC from applying for the credit.

Meanwhile, the IRS estimates it loses as much as $10 billion per year to ineligible taxpayers claiming the credit.

Proponents of the pre-certification process, including Representative Ernest J. Istook Jr. (R-OK), compare the EIC to other welfare programs such as the food stamps program. Food stamps recipients must prove eligibility before receiving the benefit.

The IRS has pointed out that pre-certification can be perceived as a benefit for those who think they may qualify for the EIC because they could find out before they even file their tax return whether or not they are eligible to receive the money.

Related stories:
IRS Wants Proof from Earned Income Recipients

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