Earned Income Credit

Noncompliance and Potential Eligibility Revisions Gao ID: T-GGD-95-179 June 8, 1995

The earned income tax credit is a major federal effort to help the working poor. As of May 1995, 17.3 million returns claimed nearly $20 billion in earned income credit for tax year 1994. Over the years, the credit has been extended to (1) offset the impact of social security taxes on low-income workers and (2) encourage low-income persons to seek employment rather than welfare. Overall noncompliance with the credit's provisions has not been measured since 1988. Nonetheless, noncompliance appears to be a problem. Further, although the credit is intended to assist the working poor, eligibility criteria have not considered all the resources recipients may be able to draw on to support themselves and their families. Finally, no one knows how many illegal aliens receive the credit.



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