RI Delegation to IRS: Don’t Let EITC Funds Go To Waste
Senators, Representatives Urge IRS to Improve Tax Credit Distribution Efforts
Washington, DC – Every year, one in five eligible taxpayers fails to collect their Earned Income Tax Credit (EITC), missing out on funds which can help balance household budgets and boost local economies. Today, U.S. Senators Sheldon Whitehouse and Jack Reed and Congressmen Jim Langevin and David Cicilline wrote to Internal Revenue Service Commissioner Douglas Shulman to ask that the agency resolve this issue by automatically screening tax returns for eligibility.
“Prior to 1992, the IRS screened all tax returns in the qualifying income range for EITC eligibility,” the delegation wrote. Noting that the practice was ended in 1992 because primitive computer systems and inconsistent internal definitions were causing credits to be mistakenly sent to unqualified individuals, the delegation pointed out that these problems have since been solved. “We ask that you explore re-implementing the automatic calculation so that all tax filers who qualify for the EITC receive it.”
The delegation also asked that the IRS commit additional resources to outreach in lower-income areas.
In 2008 75,871 households in Rhode Island received the EITC with an average benefit per household of $1,955. In total, the EITC injected $148.3 million into the Rhode Island economy. Rhode Islanders who failed to file for the credit may have missed out on a total of more than $37 million in that year.
The EITC varies with family size, and, this year, Rhode Island families earning up to $49,048 may qualify.
The full text of the letter is below.
March 2, 2011
Douglas H. Shulman
Internal Revenue Service
U.S. Department of the Treasury
1111 Constitution Avenue, NW
Washington, DC 20224
Dear Commissioner Shulman:
According to a recent IRS publication, only four out of five eligible taxpayers filed for and received their earned income tax credit (EITC) last year (IRS Tax Tip 2011-20). This means, at a time when many families are struggling to pay their bills, millions of lower-income Americans fail to claim billions of dollars in assistance each year. We applaud your efforts to raise participation and close that gap through initiatives such as “EITC Awareness Day” and partnerships with local tax agencies and non-profit organizations.
We ask that you consider enhancing your efforts at increasing EITC distributions by automatically screening tax returns for eligibility. It is our understanding that the IRS will currently calculate the credit for filers who mark their returns accordingly, but will not calculate the credit for eligible filers who fail to request an EITC calculation on their return. Prior to 1992, the IRS screened all tax returns in the qualifying income range for EITC eligibility. According to the GAO (GGD-92-132), the IRS suspended the automatic calculations in 1992 due to a large percentage of credits going to non-qualifying individuals. One of the reasons for the high level of false credits may have been the inconsistent definitions at the time of “child” for exemption and EITC purposes. Given that the definitions are now consistent and that computers have greatly evolved since 1992, we ask that you explore re-implementing the automatic calculation so that all tax filers who qualify for the EITC receive it.
To reach EITC-eligible individuals who might not file tax returns, we also ask that you commit additional resources to outreach in lower-income areas. As we have heard from Rhode Islanders, many lower-income workers do not realize they may qualify for a tax refund.
Thank you again for your attention to raising the participation rate for the EITC. We look forward to working with you to make sure that all Americans who qualify for this important credit receive it.
Sheldon Whitehouse, United States Senator
Jack Reed, United States Senator
James Langevin, United States Representative
David Cicilline, United States Representative
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