Earned Income Credit: Noncompliance and Potential Eligibility Revisions

GAO discussed its work on the Earned Income Credit (EIC). GAO noted that: (1) EIC noncompliance has been and continues to be a significant problem, with about 34 percent of total EIC paid out in 1988 awarded erroneously; (2) the Internal Revenue Service (IRS) has taken several steps to combat fraudulent or erroneous tax returns, but the success of those steps is not yet known; (3) IRS could reduce EIC noncompliance by encouraging the advance payment option and performing more timely computer matching of wage and tax return data; (4) recent legislation that provides for consideration of other income sources in determining EIC eligibility could reduce fraudulent claims but could also make EIC more complex to administer and raise concerns about the fairness of eligibility determinations; and (5) requiring EIC recipients to have valid social security numbers for work purposes would keep illegal aliens from qualifying for EIC.