GAO Reports  
GGD-95-122BR March 31, 1995

Earned Income Credit: Targeting to the Working Poor

Pursuant to a congressional request, GAO: (1) provided information on Earned Income Credit (EIC) noncompliance and the Internal Revenue Service's (IRS) actions to control EIC noncompliance; (2) reviewed the potential impacts of changes in EIC eligibility criteria; and (3) provided information on how many illegal aliens receive EIC and the administration's proposal to exclude illegal aliens from EIC.

GAO found that: (1) reliable IRS noncompliance measures for the EIC program do not exist and reliable data on the current extent of noncompliance is unavailable; (2) in 1988, about 42 percent of recipients received too much EIC and about 32 percent could not document their EIC entitlement; (3) in a sample of 1994 electronic returns, 29 percent of these recipients received too much EIC and 13 percent deliberately claimed too much EIC; (4) IRS actions to detect erroneous EIC claims include developing improved criteria for detecting multiple use of the same social security number (SSN) and valid SSN for qualifying children; (5) adding taxpayers' wealth and other income sources as EIC eligibility criteria could produce $318 million to a few billion dollars in EIC savings; (6) the additional EIC eligibility criteria would increase EIC complexity and the administrative burden of collecting needed data and treating similar taxpayers equally; (7) IRS does not know how many illegal aliens receive EIC, since it does not prohibit them from claiming EIC or require them to identify themselves on IRS forms; (8) administration and legislative proposals would exclude illegal aliens from EIC eligibility; and (9) the administration's proposal would require all EIC claimants to have valid work-related SSNs and permit streamlined IRS procedures to enforce the requirement.

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