I took the kids to school last Friday just like any other day, and I don’t recall seeing any specialty cards in the Hallmark section at Target, so I missed out on Earned Income Tax Credit Awareness Day. You probably did too.
For the uninitiated, Earned Income Tax Credit is basically a wage subsidy in the form of a refundable tax credit for low income wage earners. The amount of credit is scaled based on income levels and number of dependents, and is determined based on a published table (see Form 1040 booklet for the tables). For 2011, maximum credits for persons with three or more qualifying children is $5,751; two qualifying children, %5,112; one qualifying child, $3,094; and no qualifying children, $464.
The EITC program has also been rife with fraud over the years. People have abused the program over the years with claims of false income and/or false dependents in order to reap the refunds generated by EITC. With that in mind, the IRS now requires paid tax preparers to include Form 8867 – Paid Preparer’s Earned Income Credit Checklist with all returns in which EITC is claimed. Form 8867 is basically a due diligence checklist.
And with that, the cost of preparing a return with EITC just went up.