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