The Earned Income Credit was designed to aid needy families but unfortunately is being used by those who are using it fraudulently. Last year, the IRS paid more than $13 billion in tax credits to people who may not be eligible.
This abuse of this program is hurting anti-poverty programs and those who truly need its benefits.
J. Russell George, the Treasury Inspector General remarked, “The IRS can and must do more to protect taxpayers from waste, fraud and abuse.”
The IRS has begun fighting this abuse and is improving its efforts to oversee EITC payments. It has expressed concern and is preparing a major review to find better ways to discern valid claims from excessive ones.
The Earned Income Tax Credit is one of the country’s most extensive anti-poverty programs. More than 27 million families received almost $62 billion in credits in 2011.
The reason use of this credit has seen abuse is because the IRS will pay the difference, and issue a refund if a taxpayer’s credit is larger than their total income tax bill.
Families must work to earn the credits but there are limits on income. The amount of the credit depends on the amount of income and number of children in the household.
For example: A husband and wife with 3 or more children can have Adjusted Gross Income (AGI) up to $52,427 and still qualify. A family with 2 children can have AGI up to $49,186.
The maximum credit this year is $6,143 for a family with 3 or more children. For 2 children it will be $5,460.