For tax year 2012, 27 million taxpayers claimed $63.3 billion in EITC. We were talking about how refundable credits are a lot of money, but the bad thing is that the improper payments – bad payments going out – are 22 to 26 percent of them all. So remember, we’re talking in billions here – $13.3 billion to $15.6 billion going out in error. The IRS takes improper payments of the earned income tax credit very seriously. The IRS will continue to enforce penalties against people who improperly claim EITC benefits.
Improper Earned Income Credit Payments
Right now, about 60 percent of EITC returns are still prepared by paid preparers. It used to be a lot higher before. It’s going down about two percent a year with individuals preparing their own returns more now, so we’re watching that trend. We still rely on you because you do prepare the majority of those returns. Now, we recently got a new compliance study, and one of the things in that compliance study was comparing the error rate of self-prepared returns to paid preparer returns. And, unfortunately, the results indicated that the error rate was the same.
The IRS is continuing to monitor whether or not the Form 8867 is attached to the return because, remember about three years ago, it became a requirement that you not just keep it but you attach it to the return. So, this year we sent out letters. We sent out acknowledgement alerts to warn preparers as soon as we possibly could, if they didn’t know about it, that they needed to attach the Form 8867. And what we found out was most of these people were not using professional software. They were using over-thecounter software that is really for individuals, and it doesn’t have the Form 8867. So, that’s obviously a problem.
Filing Form 8867 for EITC
If you’re using non-professional software, you’re probably not following the e-file mandate, that if you have 10 or more returns in the 1040 series, you need to do it electronically as well. So, that’s an issue, and we’re continuing to look at it. Now, we’re asserting a $500 penalty per return if that Form 8867 is not attached, and it’s required to be attached on electronic returns, on paper returns, on amended returns, and on the returns that you give to your client that they want to file themselves. So, you need to be careful about that.