- What is the Earned Income Tax Credit?
- What is Earned Income Tax Credit Fraud?
- Penalties for EITC Fraud
- How to Avoid Fraudulent Charges
- What Should I do if the IRS has Notified me of Tax Credit Fraud?
- Tax Credit Fraud Resolution
What is the Earned Income Tax Credit?The Earned Income Tax Credit (EITC) is a tax credit available to low and moderate income taxpayers. In order to qualify for the Earned Income Tax Credit in 2020, you must generate:
- Single with no children: Under $15,820 annually
- Married filing jointly with no children: Under $21,710 annually
- Single with 1 child: Under $41,756 annually
- Married filing jointly with 1 child: Under $47,646 annually
- Single with 2 children: Under $47,440 annually
- Married filing jointly with 2 children: Under $53,330 annually
- Single with 3 or more children: Under $50,954 annually
- Married filing jointly with 3 or more children: Under $56,844 annually
- You must have at least $1 of earned income throughout the tax year
- You cannot have more than $3,650 in investment income throughout the tax year
- No children: $538
- 1 child: $3,584
- 2 children: $5,920
- 3 or more children: $6,660
What is Earned Income Tax Credit Fraud?Earned Income Tax Credit fraud occurs when either a tax practitioner or a taxpayer falsifies tax information in order to fraudulently claim the Earned Income Tax Credit or increase the amount of their Earned Income Tax Credit.
Underreporting Earned Income to Claim EITCOne way that tax credit fraudsters commit earned income tax fraud is by underreporting their earned income to meet the income qualifications to claim the Earned Income Tax Credit. Remember, the IRS does not only receive income reporting from you, but from your employer or payee as well. If the two are compared and don’t match, the IRS may investigate you for earned income tax fraud.
Fraudulently Claiming Children for EITCAnother way that earned income tax credit fraud is committed is by claiming false dependents. Tax credit fraudsters either claim a child that they don’t have or inflate the number of children they are claiming in order to increase their return. According to the IRS, dependents must meet the following requirements in order to be claimed on your Earned Income Tax Credit:
- The child(ren) must be one of the following: birth child, adopted child, stepchild, foster child, grandchild, sibling, half-sibling, stepsibling, or sibling’s child
- The child(ren) must be under 19 and younger than you OR under 24 and a full-time student. If the child is permanently disabled, there is no age limit.
- The child must have lived with you and been under your care for at least half the year within the United States
Penalties for EITC FraudPenalties for committing EITC fraud should not be taken lightly. If you’ve committed EITC fraud, you may be subject to the following penalties:
- You will need to pay back the EITC credit plus interest
- You will need to re-file to claim the EITC again
- In the case that you committed fraud by error, the IRS may ban you from claiming the EITC for the next 2 years
- In the case that the fraud was intentionally committed, the IRS may ban you from claiming the EITC for the next 10 years