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Other EITC topics for tax pros
Understanding EITC eligibility beyond having a child
Taxpayers do not need to have a qualifying child to be eligible for the Earned Income Tax Credit. In fact, low-income workers without children represent the largest group of potentially eligible taxpayers who do not claim the credit. Many of these individuals are unaware of the credit because they are not required to file a tax return.
Recertification requirements after EITC denial
If a taxpayer's EITC claim was denied in a prior year, they may be required to recertify before claiming it again. The IRS notifies these taxpayers with a CP79 notice titled "What you'll need to do the next time you claim an earned income credit." This notice outlines the requirement to file Form 8862, Information To Claim Certain Credits After Disallowance.
When clients omit prior EITC disallowance
If a tax preparer files a return and later learns that the client had a previous EITC disallowance but did not file Form 8862, the IRS will issue a math error notice and deny the credit. The taxpayer must follow the instructions on the notice to submit Form 8862 and any necessary documentation.
IRS notices when preparer determines EITC ineligibility
Sometimes the IRS sends a letter suggesting a taxpayer may qualify for EITC, even if the preparer determined they are ineligible. This typically happens when the return includes information that appears to support eligibility. The IRS looks at line 27 of Form 1040 to check for a "no" indicator for EITC. If the preparer correctly entered "no" after performing due diligence, and the taxpayer still received a CP09 letter (Earned Income Credit you may be entitled to from IRS), the preparer can report the issue to the IRS EITC program office at eitc.program@irs.gov.
Impact of EITC on other benefit eligibility
Refunds from the EITC, the Child Tax Credit (CTC), and other tax credits are not considered income for federal or federally funded public benefit programs. However, if a refund is saved for over 12 months, taxpayers should check with their state, local, or tribal benefit administrators to confirm whether the refund counts as an asset under their specific program rules.
Effect on state returns when federal EITC is denied
Federal tax return information is shared with state agencies through a data exchange agreement. If the IRS later disallows a federal EITC claim, and the state has a similar credit, the state may adjust the taxpayer's state return accordingly.
Top processing errors and how to avoid them
IRS oversight of paid preparers
Because about two-thirds of all EITC claims are submitted by paid preparers, the IRS considers preparers essential to ensuring the accuracy of EITC claims. The IRS uses several programs to identify and correct EITC errors, including during return processing, examinations, and information matching.
The most frequent EITC processing errors include:
- Mismatch between the taxpayer's Social Security number (SSN) and last name
- Multiple people claiming the same qualifying child
- Missing Form 8862 when required due to prior disallowance
To avoid these issues, verify SSNs and names using Social Security cards. Be particularly attentive to hyphenated or multiple last names. If the issue stems from a recent name change, confirm it has been reported to the Social Security Administration (SSA). Allow up to 10 days for updates from SSA to reflect in IRS systems.
Common EITC claim mistakes
The three most common mistakes on EITC claims-which account for over 60% of all errors are:
- Claiming a child who does not meet age, relationship, or residency tests
- Filing as single or head of household when actually married
- Misreporting income (either underreporting or overreporting)
Proper training and thorough due diligence can help minimize these errors.
Related
What you need to know about child tax credits
How to avoid child tax credit errors
What you need to know about education credits