EITC Certificates: How a Certification Mandate Would Function like a Universal Audit 

The third analysis on current Congressional debates about benefits to low-income children, this paper covers the effect of new requirements for beneficiaries of the Earned-Income Tax Credit (EITC).

Summary

• The House-passed reconciliation bill calls for the creation of a new EITC certification program where parents must submit supporting documentation to prove they can rightfully claim their children to receive the EITC, the same procedure that audited EITC claims go through.
• To receive a certificate, parents will likely be subject to strict documentation requirements to show the child they are claiming lived with them for over half the year. Non-biological parents will likely need to prove their familial relationship with the child in question via birth certificates.
• If all EITC recipients claiming children must comply with audit procedures to receive a certificate, they will effectively be audited over 200 times the rate of other taxpayers. 
• The certification requirement will impact a large swath of taxpayers: one in three children are claimed for the EITC, and over one in ten tax returns claim children for the EITC.
• The stated rationale for the compliance program is the number of duplicate EITC claims for the same child. Duplicate claims comprise just 1 percent of the total number of children claimed for the EITC, and duplicate claims have been falling rapidly over time due to the growing prevalence of e-filing, which helps streamline IRS compliance efforts.