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I.R.S. Delays New Scrutiny of Tax Credit for the Poor
The New York Times ^ | August 7, 2003 | LYNNLEY BROWNING

Posted on 08/06/2003 7:04:02 PM PDT by Willie Green

For education and discussion only. Not for commercial use.

The Internal Revenue Service is putting off until next year a pilot program to require certain low-income taxpayers to provide conclusive proof of their eligibility for a special tax credit and reduce the number of people covered by the program. But it will also look more closely at other poor wage earners seeking the credit.

Terry Lemons, an I.R.S. spokesman, said in an interview yesterday that the heightened scrutiny for the second group would constitute "a new area of emphasis" on poor people whom the agency suspects of having misrepresented their eligibility for the credit, known as the earned-income tax credit.

The credit was established as an incentive for the poor to keep working. It allows a low-income taxpayer to offset Social Security taxes to reduce the amount of federal income tax owed and in some cases provides a refund even in the absence of any tax liability.

The I.R.S. is seeking to weed out improper claims for the credit.

Around 19 million low-income wage earners claimed more than $32 billion in such credits last year, making it one of the government's largest programs to aid the poor.

The I.R.S. has said that 27 percent to nearly 32 percent of the amount paid out last year was claimed improperly. Many disputed claims involve separated or divorced parents who each claim that children are living with them.

The pilot enforcement program originally would have required 45,000 low-income wage earners to provide proof that claimed children actually lived with them for at least half a year. Under the new plan, 25,000 low-income wage earners will have to provide the proof.

In announcing the changes on Tuesday, the agency said its pilot program would now begin at the start of the next tax filing season, early in January, instead of this month.

The I.R.S. rolled back the timetable after receiving comments and criticisms from tax specialists, advocates for the working poor and others, according to Mr. Lemons. Some advocacy groups said that too great a burden was being imposed by the pilot program's requirements that participants produce documents they may have trouble procuring, like home day care records, and then fill out a confusing form.

"We decided the best course was to step back and take a look at the plan," Mr. Lemons said.

Under its original timetable, the I.R.S. wanted poor wage earners to submit proof of eligibility before they claimed the credit, but now applicants will be allowed to submit their proof-of-eligibility claims when they file their tax returns.

For the pilot program, the I.R.S. has selected low-income workers it believes are at risk of making erroneous claims for the credit. The agency said Tuesday that it would notify workers later this year that they have been selected.

It also said that next year it planned to scrutinize 300,000 low-income taxpayers who seek the credit, not just 180,000 as it had originally announced in April, to determine if they misreported their income or misstated their filing status.

Nancy Mathis, an agency spokeswoman, said in an interview yesterday that the I.R.S. would verify eligibility by cross-checking wage documents, like W-2's, with tax returns. As in the pilot program, the taxpayers are not randomly selected but rather have been flagged by the I.R.S. as "at risk" of making improper claims, she said


TOPICS: Business/Economy; Culture/Society; Government
KEYWORDS: childtaxcredits; earnedincome; irs; taxcredits

1 posted on 08/06/2003 7:04:03 PM PDT by Willie Green
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To: Willie Green
Nancy Mathis, an agency spokeswoman, said in an interview yesterday that the I.R.S. would verify eligibility by cross-checking wage documents, like W-2's, with tax returns.

What do they do now?? Hold the 1040 up to their mouths and flutter the W2s....

2 posted on 08/06/2003 7:12:01 PM PDT by evolved_rage (Davis is a POS!)
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To: Willie Green
How can you give people a tax break when they don't pay any taxes?
3 posted on 08/06/2003 7:28:08 PM PDT by True Grit
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To: evolved_rage
I can't believe that they can't do a quick pass of all people claiming the EITC, especially since they require a SSN for each child.

I'm not a big tax fan, but if you have a tax that has 27-32% cheating, that's something that needs to be looked into.

At 32 Billion, that's around 8-10 BILLION wasted.
4 posted on 08/06/2003 7:30:15 PM PDT by cryptical
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To: cryptical
They are not lying about the number or the percentage of people cheating. I personally met several people who cheat and it used to burn me to no end, I am busting my butt trying to makes end meet and get a piddling or have to pay. They get checks for 4 or 5 thousand back and worked maybe a month out of the year.
5 posted on 08/06/2003 7:53:26 PM PDT by BushCountry (To the last, I will grapple with Democrats. For hate's sake, I spit my last breath at Liberals.)
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To: cryptical
I wonder if its a bigger version of the reparation scams. I seem to recall several hundred returns were processed wherein the filer claimed a one time slavery reparation credit, and the IRS issued hundreds of checks for around $40,000 a piece. There had to be institutional facilitators to write so many large checks. Probably some rat/rino holdover forbids auditing EITC, and word of mouth of the practice has spread in certain lower income communities.
6 posted on 08/06/2003 8:45:04 PM PDT by evolved_rage (Davis is a POS!)
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To: BushCountry
How can they cheat when they require SS# for all kids? A co-worker of the wife who hadn't been at her job long, electronically filed for ETC with her return last year. She wrote one number wrong on her kids SS# and the IRS refused to accept her return until it was fixed.
7 posted on 08/06/2003 8:50:03 PM PDT by bigfootbob
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To: bigfootbob
It is very easy, they claim they are seperated to leave the husband/wife's income out, thus they recieve more earn income credit for their childern, usually thousands of dollars more (they use a parents/relative's address for filing). Another trick they employ is they have a relative who is on welfare with a child or two (no income, os no filing), then they claim they are responsible for the child's upbringing (this works for even distant cousins) and then claim these kids as dependents even if they don't live in the same state. I am sure there are several other ways they have to scam the system and they employ them all.
8 posted on 08/07/2003 4:12:31 AM PDT by BushCountry (To the last, I will grapple with Democrats. For hate's sake, I spit my last breath at Liberals.)
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To: BushCountry
Jesus, That takes some thought. If a person is that industrious, why the hell aren't they leading a Fortune 500 company or working for the IRS?
9 posted on 08/07/2003 8:11:39 AM PDT by bigfootbob
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