Kate Leifeld


The Earned Income Tax Credit (EITC) is meant to help low-income, working taxpayers and their families by providing a refundable tax credit. In healthy economic times, the EITC is relied upon to pull low-income taxpayers and their children out of poverty. However, we are facing the toughest economic climate in decades. In September 2009, unemployment was reported to be at 9.7 percent. While the economic outlook has begun to show signs of improvement, the unemployment rate for February 2010 remained at 9.7 percent. Even when improvement starts, the turnaround will not be overnight. In this economic climate, the EITC becomes even more important. High levels of unemployment mean that many more families will struggle to make ends meet. Families that were already surviving on the margin will now face additional pressure just to survive. However, taxpayers who claim the EITC are subject to a high level of IRS examination because of perceived EITC fraud. In fact, EITC audits now comprise roughly 36 percent of all individual taxpayer audits. If not successful in the audit process, the taxpayer may be denied part or all of this valuable credit. A study that appeared in the 2007 National Taxpayer Advocate Report to Congress (2007 NTA study) revealed that when taxpayers have professional representation during an EITC audit, they are almost twice as likely to be found eligible for the EITC as unrepresented taxpayers. This study demonstrates that fraud is not the sole cause of EITC noncompliance. It also shows that representation can make a positive impact for low-income taxpayers.

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