Tax Question - EIC Credit

[Bikerdude]

Yes! Welcome to the world of "Refundable Tax Credits"!

I wonder how these play into the stats that show things like ~ 50% of filers pay no taxes? How about the ones that get paid to file?

-ERD50

When I did taxes EIC refunds were big business as the recipients wanted their money as fast as possible. The SS cards for kids were routinely rented by parents who made too much for EIC to people who could get the credit. Sometimes netting $500 per kid for the ineligible parent. The IRS has started to audit some of these but the scams are still out there. EIC was supposed to replace welfare by making work pay.

 

[frayne]

Unfortunately our tax code makes it ripe for people to game the system, not only EIC but first time home buyer credit, business deductions, charitable contributions just to name a few. The IRS only has so much manpower to investigate and prosecute the law breakers, therefore many people believe they can cheat and get away with it, and for the most part, they probably do.

 

[rothlev]

This year the IRS appears to have been auditing most all earned income credit returns claiming children who are other than son and daughter, ie) niece , nephew, sister, brother) They require proof of relationship and proof that the child lived with the taxpayer claiming the credit.