The New Earned Income Credit Form Is Complex and May Not Be Needed

GAO discussed the Internal Revenue Service's (IRS) efforts to develop a new form for taxpayers to use in applying for the earned income tax credit. GAO noted that: (1) IRS set up a special task force to develop the new form, solicited comments outside of the usual channels, and tested the clarity and simplicity of the forms and instructions by using focus groups; (2) based on comments IRS received from the public and focus groups, it made a number of changes to the initial version of the form; (3) individuals experienced in filling out their own tax returns comprised the focus groups, because taxpayers inexperienced with filling out their own returns provided few useful comments; (4) IRS has increased its efforts to inform potential recipients about the credit, by distributing materials to interested groups and using these groups as integral parts of its information and outreach program; and (5) new IRS returns processing procedures are likely to limit the number of taxpayers who will receive the credit and could result in taxpayers who qualify for the basic credit either not receiving it or receiving it late. GAO believes that: (1) the complexity of the new tax form could dissuade some eligible taxpayers from completing the form and getting the credit; (2) information on the tax return is sufficient for IRS to determine a taxpayer's eligibility for the basic credit; and (3) a separate tax form is not really necessary.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

Director: Lynda D. Willis Team: General Accounting Office: General Government Division Phone: (202) 512-8633