IRS to Require Proof of Tax Credit Eligibility

The Internal Revenue Service said Tuesday that it would require low-income workers to prove their eligibility to receive an earned income tax credit next year to try to stop fraud associated with the program.

The IRS said 25,000 recipients of the earned income tax credit would be required to “pre-certify” their eligibility by providing documents such as birth certificates starting with the 2004 tax filing season in January.

The certification initiative is designed to stop erroneous and fraudulent payments in a program identified by the General Accounting Office as “high risk.” Up to $9.9 billion in improper payments were distributed in 1999, the IRS said.

“Our goal is a fair and balanced EITC program -- one that clearly encourages eligible people to apply while reducing erroneous claims,” IRS Commissioner Mark Everson said.

Critics such as Chicago Mayor Richard M. Daley have said the certification process would discourage some low-income workers from claiming the credit, which is intended to offset Social Security and Medicare taxes deducted from paychecks.

Some 19 million taxpayers claimed $32 billion in the refundable credits in 2002. Families with children receive larger checks, which has allowed some to claim the credit for children they can’t legitimately claim as dependents.

In response to criticism, the IRS cut the number of people subject to the new certification requirements next year to 25,000 from 45,000 and made forms to be used in the initiative easier to understand, Everson said.