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Financial Website Directory Ireland

Earned Income Tax Credit Requires Tax Preparer Ethics

Author: Sawyer Adams
Category: Tax Preparation
Date Added: August 10, 2011 11:47:23 AM
Page Views: 1732

The incidents of IRS audits are increasing and about 40 percent of audited tax returns last year involved the Earned Income Tax Credit (EITC). Examination of a tax return by the IRS is time-consuming and frustrating. Although there is no sure way to avoid an audit, choosing a high quality tax preparer is especially valuable.


A report by the National Taxpayer Advocate states that 60 percent of individuals use paid tax preparers. If the IRS suspects that a particular tax return preparer is consistently engaged in erroneous acts, all the work of that preparer is at risk for examination. Consequently, taxpayers benefit by careful selection of a professional who has completed an IRS registered tax return preparer program.


The EITC is a refundable credit. Therefore, if it exceeds tax liability, it increases a tax refund. Although many who qualify for the EITC fail to apply for it, there are also ineligible taxpayers claiming the credit. The IRS has implemented tight standards of tax preparer ethics for addressing EITC situations.


One of the common errors the IRS has identified involves claiming a child for the EITC that is not eligible. Although a child is not required for the credit, taxpayers with qualifying children are entitled to the EITC at lower income levels than a childless taxpayer.


A qualifying child for the EITC must have lived in the US with the taxpayer for half the year. The child's relationship with the taxpayer must be son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, or a descendant of any of them. Finally, an EITC qualifying child must be under age 19, a full-time student under 24 or totally disabled. A child who files a joint tax return is ineligible unless filing only to claim a full refund of withholding.


Registered Tax Return Preparer training provides all the conditions taxpayers must meet for the EITC. Although earned income is required, the adjusted gross income of the taxpayer must not exceed income limits based upon filing status and family size. Individuals who are married filing separately cannot claim the EITC. An important part of RTRP guidelines is avoiding incorrect claims of Head of Household status in order to obtain the EITC.


Taxpayers claiming the EITC must be US citizens at least 25 years old and under age 65. They are also required to have lived for more than half the year in the US and cannot be claimed as dependents of someone else.


The highest EITC is available to taxpayers with three qualifying children. This is an expansion of the previous threshold allowing two children as the maximum.


IRS Circular 230 Disclosure


Pursuant to the requirements of the Internal Revenue Service Circular 230, we inform you that, to the extent any advice relating to a Federal tax issue is contained in this communication, including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code, or (b) promoting, marketing or recommending to another person any transaction or matter addressed in this communication.