Beginning in December of 2003, the Internal Revenue Service launched a new earned income tax credit (EITC) compliance initiative. The key aspect of this new initiative is the “precertification” of a number of EITC claimants. These filers will have to provide documents verifying certain elements of their returns including the relationship to and residency status of the qualifying child claimed on the tax return, residency, marriage status, and income before they file their returns. The EITC portion of these taxpayers refunds will be delayed until the IRS can review the documents.

For the 2004 test, the IRS sent a verification form to 25,000 taxpayers who claimed the EITC with qualifying children in 2003. These taxpayers were selected at random from the overall population who claimed the credit in 2003. The results show a significant effect. Compared to the overall EITC claimants, the test group had fewer taxpayers claim the EITC, fewer taxpayers claimed the EITC with qualifying children, and fewer children were claimed. It is unclear at this time if the test reduced erroneous claims or if the test discouraged those eligible to claim the credit.

The IRS changed the qualifying-child certification test for the 2005 tax season in a number of ways. The notice was sent in November and was followed in two-week intervals with reminder notices. These notices instruct the taxpayer that they may send their documents at any time from the receipt of the notice until they file their claim. The IRS hoped that this would allow them to process the submissions more quickly. Another difference from the 2004 test is that a portion of the 25,000 test population would be drawn from a single community. In this community, which was Hartford, CT, all EITC taxpayers were asked to submit the certification form.(1)

A number of groups have argued that precertification will create hardships for low-income workers who qualify for the credit. These people may not be able to compile required documentation and/or complete and submit required forms needed to receive the credit they have earned on time or at all. Advocates interested in additional information on this topic should visit the Center for Budget and Policy Priorities website.

Below we have presented a selection of legislation, testimony, articles, reports, and other materials as background on this important change in EITC regulation.

(1) 2005 Earned Income Tax Credit Certification Text <http://www.irs.gov/individuals/article/0,,id=118200,00.html>

New IRS Forms

EITC Notice and Forms Background and Key Messages

Instructions for Form 8836

Form 8836

Form 8836 (Spanish version)

Schedule A

Schedule B

Legislation, Testimony, Letters & Press Releases

"Letter to the IRS from The Greater Upstate Law Project" offering comments on the pre-certification process and its effect on New York State, July 14, 2003.

"IRS to Launch EITC Certification Pilot Program In 2004 Filing Season," by The Internal Revenue Service, Press Release, August 5, 2003.

Testimony Before the House Committee on Ways and Means, by Leonard E. Burman, Senior Fellow, The Urban Institute, July 17, 2003.

Testimony Before the House Committee on Ways and Means, by The Honrable David M. Walker, Comptroller General, U.S. General Accounting Office, July 17, 2003.

Tax Evasion, IRS Priorities, and the EITC, Testimony before the Committee on Budget; On Waste, Fraud and Abuse in Federal Mandatory Programs, by Leonard E. Burman, Senior Fellow, The Urban Institute, July 9, 2003.

Rangel Launches Campaign to Protect the Rights of those Filing for the EITC, by Congressman Charles B. Rangel, New York – 15th District, April 30, 2003.

DeLauro Releases Letter to Secretary Snow Opposing New Tax Credit Regulations, by Congresswoman Rosa DeLauro, Connecticut – 3rd District, May 23, 2003.

Testimony Before the Committee on Senate Appropriations Subcommittee on Transportation, Treasury, and General Government, by John Snow, Secretary of the Treasury, May 7, 2003.

H.R.1894
Title: To prohibit the implementation of discriminatory precertification requirements for the earned income tax credit.
Sponsor: Rep Rangel, Charles B. (D-NY)

“Compliance and Collection: Challenges for IRS in Reversing Trends and Implementing New Initiatives,” Testimony Before the Subcommittee on Transportation, Treasury, and Independent Agencies, Committee on Appropriations, House of Representatives by Michael Brostek, Director Strategic Issues, May 7, 2003.

“Earned Income Credit: Opportunities To Make Recertification Program Less Confusing and More Consistent,” Report to the Chairman, Subcommittee on Oversight, Committee on Ways and Means, House of Representatives by the General Accounting Office, April 2002.

"Proposal for a Uniform Definition of a Qualifying Child," U.S. Department of Treasury, April 2002.

Testimony before the Subcommittee on Transportation and Treasury Committee, Committee on Appropriations, House of Representatives, by Robert Greenstein, executive director, Center on Budget and Policy Priorities, May 7, 2003. 

News Articles

"Chalk One Up For Council," South Florida Sun-Sentinel, September 8, 2003.

"Low Income Tax Credits Restricted; Filers Will Be Asked to Prove Eligibility For Benefit" Alameda Times Star, September 3, 2003.

"Tax Crackdown; Overkill on the Earned Income Credit," The Star Tribune, August 7, 2003

"I.R.S. Delays New Scrutiny Of Tax Credit for the Poor," by Linnley Browning, The New York Times, August 7, 2003.

"IRS, in Test, to Require Proof of Eligibility for Tax Credit," by Albert B. Crenshaw, The Washington Post, August 6, 2003.

"IRS to Require Proof of Tax Credit Eligibility," by Bloomberg News, The Los Angeles Times, August 6, 2003.

"IRS to Ask Low-Income Families for Proof," by Mary Dalrymple, The Associated Press, August 5, 2003.

“Daley Accuses IRS of Targeting Poor,” by Sabrina L. Miller, Chicago Tribune, July 25, 2003.

“IRS is Scaring Poor From Claiming Tax Credit: Daley,” by Fran Spielman, Chicago Sun-Times, July 25, 2003.

"A Test of Fairness," Editorial, The Philadelphia Inquirer, July 24, 2003.

"Senators Urge Administration to Stop Burdensome IRS Program that Violates Privacy," Press Release, July 19, 2003.

“IRS Rule Biases Against Poor, Critics Say,” by Suzanne Hohlik, The Columbus Dispatch, July 17, 2003.

“New IRS Red Tape Will Tie Up Poor, Mike Says,” by Frank Lombardi, Daily News, July 15, 2003.

"Research Required For the EITC Precertification Procedure," by Eugene Steuerle, Tax Policy Center and The Urban Institute, Tax Notes, July 14, 2003.

“Paper Chase For the Poor/Bush Plan Could Hurt Deserving Families Seeking Tax,” The Pittsburgh Post Gazette, June 23, 2003.

“EITC Non-Compliance: What We Don’t Know Can Hurt Them,” by Leslie Book, Tax Analyst Special Report, June 23, 2003.

“Scorn For the Working Poor,” by Ellen Goodman, The Washington Post, June 21, 2003.

“Another Tax Robbery Coming,” David Marzahl and Julie Kruse, Chicago-Sun Times, Editorial, June 17, 2003.

“New IRS Rules Burden Working Poor; At Issue is Standard of Proof on Recipients of Tax Credit for Earned Income” by Mike Swift, Hartford Courant, June 16, 2003.

“Claiming Kids? IRS Wants Some Proof” by Kathy M. Kristof, Los Angeles Times, June 14, 2003.

"IRS Announces Steps to Improve EITC Administration, Seeks Public Comment" News Release, June 13, 2003.

“And the Poor Pay Taxes” by Roy Ulrich, The Nation, June 2, 2003.

“Narrow Focus on Tax Fraud; Low-Income Workers Feel the Heat, But Big Cheats Get Scant Attention” Sarasota Herald-Tribune, June 1, 2003.

“Crackdown on Tax Credit Put Off to Allow Comment” by Albert Crenshaw, The Washington Post, May 23, 2003.

“Democrats Vow to Block IRS Program to Reduce Improper Claims For Working Poor Tax Credit” The Associated Press, April 30, 2003.

“New Tax Audits for Low-Income Families” by Mary Deibel, Scripps Howard News Service, April 16, 2003.

“Winners, Losers, and Gimmicks,” Washington Post Editorial, May 15, 2003.

“Tax Break or Breakdown?” by Nina Olson, National Taxpayer Advocate, Washington Post, May 14, 2003.

“The I.R.S. Goes After the Poor,” New York Times Editorial, April 27, 2003

“Corporate Tax Havens and the EITC,” by OMB Watch, The Watcher, April 21, 2003, vol. 4 No. 8.

“Congress Wary of IRS's Plans to Precertify EIC Recipients,” Tax Notes, April 9, 2003.

" News Analysis: IRS to Launch New EIC Verification Initiative in July," by George Guttman, Tax Notes, March 31, 2003.

“ Auditing the Poor,” by John Lewis, CenterPoints, March 2003.

"EITC Noncompliance: The Determinants of the Misreporting of Children," by McCubbin, Janet. National Tax Journal, 53(4): 1135-1164. December 2000.