Are you planning on claiming the Earned Income Tax Credit (EITC) or the Child Tax…
Did you know about 27 percent of Earned Income Tax Credit returns are paid in error? According to the IRS, the five most common errors account for more than 60 percent of erroneous claims. Remember, EITC preparers have due diligence requirements or questions you must ask your client, to determine eligibility for the credit. Errors can delay your refund or could end up denying your EITC claim. Watch out for these common errors when claiming EITC.
Below, we list the five most common errors according to the IRS and some tips for handling them.
We find most of the errors are because the child is not related to one of the listed relationships or the child didn’t live with the person or persons on the tax return (residency test). Read more about qualifying child rules here.
This is often caused because the child lived with more than one person for more than half the tax year. But, sometimes, a person claims a child who didn’t live with them for more than half the tax year. Find more information on our “Qualifying Child of More Than One Person” page.
Look at the Social Security card of everyone listed on your return to make sure the number matches and that you use the name the same way the Social Security Administration lists the name. Read more about Social Security Numbers and EITC here.
Unsure about your tax filing status? Use the EITC Assistant to find out! Or, use the Spanish version of the EITC Assistant.
Be sure you wait until you have all your Forms W-2, W-2G, 1099 MISC, and all other income records, even if not reported on a form, before you file your return. And, you need to report all the income you earn from running or owning a business or farm and deduct all allowable expenses.
Avoid an audit, additional tax, penalties or interest by making sure all the information on your tax return is complete and correct. There are consequences for filing your returns with errors whether you made a mistake or knowingly did it. Find out more about the consequences of errors on your EITC returns here.
If you pay someone to prepare your return, that person and the firm the person works for has the responsibility to make sure your return is correct. Expect your preparer, whether you pay or it’s free, to ask you a lot of questions to make sure your return is correct. For more information on choosing a preparer, see our page “IRS Advice on How to Choose a Tax Preparer.” For more information on the preparer’s responsibilities, see our article, “Consequences of Not Meeting Your Due Diligence Requirements.”
If the IRS would pick your EITC claim for an audit based on the child you claim, they will ask for proof that the child is your qualifying child. Or, if you and another person claim the same child, they may ask you to send proof. The following are some of the documents you can use to support your claim:
Relationship Test: You need to send proof the child is related to you:
Proof of Residency (you may have to send more than one of the following to show your child lived with you for more than half the year):
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