United States Government Publishing Office publisher pbl distributor dst United States Government Accountability Office General Government Division author aut Government Organization text government publication eng GAOREPORTS Legislative Agency Publications gao legislative 2010-08-12 U.S. Government Printing Office 1998-07-28 monographic deposited born digital 52 p. GA 1.13:GGD-98-150 https://www.govinfo.gov/app/details/GAOREPORTS-GGD-98-150 P0b002ee18037d45a f:gg98150 DGPO 2010-08-12 2011-03-28 GAOREPORTS-GGD-98-150 machine generated eng fdlp REPORT GAOREPORTS-GGD-98-150 GGD-98-150 Noncompliance Income taxes Tax credit Tax administration Overpayments Tax return audits Tax refunds Tax violations Earned Income Tax Credit IRS Earned Income Credit Compliance Initiative EIC Letter Report GGD Pursuant to a congressional request, GAO reviewed the Internal Revenue Service's (IRS) 1994 Earned Income Credit (EIC) compliance study, focusing on: (1) evaluating IRS' study methodology to determine if the reported results were reasonably accurate; (2) identifying the primary sources of EIC noncompliance found in the study; and (3) determining whether recent IRS compliance efforts are designed to address the primary sources of noncompliance.<p/>GAO noted that: (1) IRS' estimate of $4.4 billion in EIC overclaims has a 95-percent confidence interval of $4.0 billion to $4.9 billion; (2) GAO's evaluation of the study methodology showed that the estimate is reasonably accurate and representative of EIC claimants filing between January 15 and April 21, 1995; (3) some aspects of the study methodology affected the precision of the results; but, given the scale of the findings, these limitations do not affect the study's message or its usefulness in designing compliance approaches; (4) although it is a reasonable estimate of EIC overclaims, the entire $4.4 billion should not be viewed as a potential savings to the government had IRS somehow been able to prevent or correct all of these errors; (5) for returns filed with an EIC claim, the tax year 1994 study was designed to evaluate taxpayers' compliance with each EIC eligibility filing requirement, to produce an overall estimate of EIC amounts claimed in error, and to identify the sources of these errors; (6) the study was not designed to detect or quantify EIC claims that taxpayers could have made; (7) the largest source of taxpayer error identified by the tax year 1994 study relates to EIC requirements that are difficult for IRS to verify--those related to qualifying children; (8) unlike income transfer programs, the EIC was designed to be administered through the tax system; (9) this choice generally should result in lower administrative costs and higher participation rates and emphasizes that the credit is for working taxpayers; (10) EIC eligibility is difficult for IRS to verify through its traditional enforcement procedures; (11) thoroughly verifying qualifying child eligibility requires IRS to do an audit of the type done in the EIC compliance studies; (12) with new enforcement tools provided by Congress and an increase in funding designated for EIC-related activities, IRS began implementing in fiscal year 1998 a plan that, over a period of 5 years, calls for attacking EIC noncompliance; (13) most of the efforts that make up the EIC compliance initiative had not progressed far enough at the time GAO completed its audit for it to make any judgment about their effectiveness; (14) IRS plans to measure the overall impact of the compliance initiative on the overclaim rate through annual studies of EIC compliance starting with a baseline study of tax year 1997 returns; and (15) IRS plans to measure the results of the individual initiative components implemented in 1998. https://www.govinfo.gov/content/pkg/GAOREPORTS-GGD-98-150/html/GAOREPORTS-GGD-98-150.htm https://www.govinfo.gov/content/pkg/GAOREPORTS-GGD-98-150/pdf/GAOREPORTS-GGD-98-150.pdf GAO/GGD-98-150 https://www.govinfo.gov/app/details/GAOREPORTS-GGD-98-150 Letter Report GAO/GGD-98-150; Earned Income Credit: IRS' Tax Year 1994 Compliance Study and Recent Efforts to Reduce Noncompliance; Noncompliance Income taxes Tax credit Tax administration Overpayments Tax return audits Tax refunds Tax violations Earned Income Tax Credit IRS Earned Income Credit Compliance Initiative EIC Public Law 104-193 Public Law 105-34