Tax Administration

Earned Income Credit--Data on Noncompliance and Illegal Alien Recipients Gao ID: GGD-95-27 October 25, 1994

For tax year 1993, 14.7 million low-income taxpayers claimed about $15 billion in earned income credit benefits. Congress and the Internal Revenue Service (IRS) have long been concerned about noncompliance with earned income credit requirements. This report includes IRS' preliminary data on the extent of noncompliance with earned income credit requirements in tax year 1993 and describes the data available on the number of illegal aliens who received the earned income credit benefits.

GAO found that: (1) although reliable data do not exist on the extent of noncompliance with EIC requirements, the Internal Revenue Service (IRS) believes that substantial noncompliance continues; (2) a preliminary IRS study showed that an estimated 29 percent of EIC returns filed electronically during the sampling period claimed excessive refunds and 13 percent of the returns intentionally claimed too much EIC; (3) erroneous EIC claims totalled $358 million in 1993; (4) intentional erroneous claims constituted 12 percent of the total dollar amount claimed in 1993; (5) IRS had controls in place to prevent EIC refunds from being issued when returns included possibly erroneous or incomplete information; (6) illegal aliens are not prohibited from paying taxes or receiving EIC and are not required to reveal their immigration status on their tax returns; and (7) IRS has identified at least 160,000 potentially illegal-alien tax filers through tax return information and believes most of them will not receive EIC benefits because they cannot support their EIC claims.

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