Earned Income Credit - 2019 (Text Based)

The Earned Income Credit (EIC) is a refundable tax credit that has a significant impact on United States revenue. In fact, EIC claims in any year generally total more than $68 billion.

EIC claims are also increasing in both number and amount. In the ten year period ending in 2014, the number of EIC claims increased from 22.8 million to 28.5 million, an increase of 25.4%. Not only had the number of claims for EIC increased over the period , the average credit per family also increased by 28.5%, from $1,864 at the beginning of the period to $2,395 in the year the 10-year period ended. The combination of an increased number of EIC claims coupled with an increase in the average credit caused the total amount of EIC claimed to climb by 61.1% over the period from $42.4 billion to $68.3 billion.

In a recent year, 148.6 million individual federal tax returns were filed, and 28.5 million—19.2% of individual taxpayers—claimed the Earned Income Credit. Based on that percentage, it would not be unexpected that approximately one taxpayer in every five may claim the EIC.

Learning Objectives:

1. Apply the earned income credit rules to determine if a taxpayer is eligible for the tax credit;
2. Identify the common errors committed in connection with the earned income credit;
3. Describe the consequences of the IRS’ disallowance of the earned income credit; and
4. Recognize the tax return preparer’s EIC due diligence requirements