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IRS Looks Into 2014 Earned Income Tax Credit Claims

Jan 5th 2016
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The IRS said last week that it is sending letters to some taxpayers who may not be entitled to some or all of the Earned Income Tax Credit (EITC) that was claimed on their 2014 income tax return.

Taxpayers who the IRS believes filed questionable EITC claims could receive Letter 5621, Letter 5621-A, or both, according to an alert sent to tax preparers on Dec. 29, 2015.

Letter 5621 asks the taxpayer to review his or her tax return to determine if the children claimed each met all the qualifying child rules for the credit. The following must be true for each child the taxpayer listed on his or her return in order to claim the credit:

  • The child is related to the taxpayer.
  • The child met the age requirement.
  • The child lived with the taxpayer.

The letter explains in more detail the EITC requirements, and it also explains next steps for the recipient and provides additional information.

Letter 5621-A asks the taxpayer to review his or her tax return to determine if all the income and expenses reported from self-employment on Schedule C or Schedule C-EZ are complete and correct.

“To report self-employment income as earned income for the EITC, you must carry on a trade or business with a profit motive or receive taxable compensation for performing services on a part-time basis and you must report all your income and expenses,” the letter states.

Letter 5621-A describes in more detail the reporting requirements, and it also includes next steps and additional information.

“If your client(s) receive a letter, they should review their 2014 tax return for accuracy and, if needed, file an amended tax return to make the necessary corrections,” the IRS told tax preparers in the alert.

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