Posted by Larry Hurt

EITC Letters and Notices: How to Avoid Errors

EITC Letters and Notices: How to Avoid Errors

Earned Income Tax Credit or EITC is a refundable credit targeted at low-income earners. Over the years, many people have qualified for EITC due to the increasing economic downturn and financial hardship. As a result, there are many first time qualifiers for this credit. Created in 1975, it is a way for taxpayers with low income to receive some benefits.

As beautiful as the idea of EITC is, many people cannot do without mistakes when filling it. The IRS, as well, noticed increased errors in EITC claims. This will affect one's benefit and could subject one to sanction.

As a result, the IRS has come up with various strategies to help people avoid common errors when filing their EITC claims. According to David R. Williams,

"The Earned Income Tax Credit law is very complicated," He further affirmed that 

"Even some tax professionals find the law difficult. We understand it is complex, and that is why we are making a major effort to help taxpayers understand the law."

The error can be classified into four categories. The following section will shed light on it

Qualifying Child

This falls to the class of both relationship and residency requirements. It is not only your kids (sons and daughters) that can be designated for the credit. Adopted children, stepchildren, grandchild, etc. all qualify. Also, a qualifying child could be any member of your relationship that is living with you, and you are responsible for the person. For instance, brother, sister, stepbrother or stepsister, or any member of the descendants.

As long as the child has lived with you for more than half of the year (or more than 183 days), they qualify. Claiming a child has been with you from Feb 1 to July 1 is not more than half of a year. Many people are guilty of this form of errors.

Mistake on Income 

Many people claiming the EITC benefit also make the mistake of falsifying their earned income. For people to qualify for full or partial payment, the adjusted gross income of the taxpayer must be less than

  • $33,692 with two or more kids. If married, $34,692 and filing jointly
  • $29,666 with one child and $30,666 if married and filing jointly
  • $11,230 without kids and $12,230 if married and filing jointly

This is not to say that people without kids do not qualify for EITC. You are qualified as long as you meet the requirement. Anyone, irrespective of the marital status which earns monthly and is not dependent on another person, can be eligible as long as you meet the income requirement.

Filing status

According to the law, you cannot be married and separately claim EITC. This cannot be changed even though some people try to get around this. Many people manipulate their status by changing to single or claim the head of the house. 

Some married people, as well, in a bid to outsmart the system file separately as single. Even if they have joint incomes exceeding the EITC limit, they try to bypass the system. This is wrong and could attract consequences!

Wrong Social Security Number 

Taxpayers also, at times, make the mistake of using inaccurate social security numbers. This, also leads to complications in the EITC claims. 

Errors on Your EITC Returns: Consequences 

Even if another person prepares your EITC Return for you, you are responsible for what is on it. This is why it is in your best interest to make sure your claim is error-free. There are some penalties of errors which are listed below:

  • Several months of delay on your EITC till the error is corrected. 
  • You might be denied all or part of your EITC claim. Should you be denied, you might be mandated to refund the EITC amount paid in error alongside the accrued interest. Also, before you are eligible for EITC again, you might have to file form 8862.
  • Two years ban if the error is because of deliberate disregard of the rule.
  • Any attempt to outsmart the system could trigger a ten year ban

EITC is a valuable credit; hence, it is good to determine if you are eligible. Avoid the temptation to cheat and outsmart the system. It comes back with severe consequences. 

Larry Hurt
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