The Earned Income Tax Credit (EITC) is a refundable tax credit for low income American families with wage income. Almost without exception, these households do not have an income tax liability. The EITC, then, is really a check written by the IRS to keep households out of poverty. It is not income tax relief.
The EITC has a high error rate. The IRS itself admits that, in 2013 alone, 22 to 26 percent of all EITC payments were made in error. The erroneous payments totaled between $13.3 billion and $15.6 billion. This was spending, right out of the Treasury Department, to people who were never eligible for this money.
Congressman Cory Gardner (R-Colo.) will this week introduce legislation called the “Earnings Advancement and Recovery Now (EARN) Act.” It makes four essential EITC reforms:
–increase the penalty for those who engage in willful or reckless content with regard to the EITC
–expand the EITC disallowance period to five years for willful or reckless EITC recipients
–expand the IRS’ math error authority to cover EITC claims, and
–expand penalties for erroneous EITC claims
These measures are simple reform tools for an EITC which has completely failed in its mission. No private sector business could tolerate payment errors to a quarter of their payees, but that’s exactly what’s happening at the IRS with the EITC. ATR urges all Congressmen to co-sponsor and support this common sense EITC reform package.