The New Earned Income Credit Form Is Complex and May Not Be Needed

T-GGD-91-68: Published: Sep 17, 1991. Publicly Released: Sep 17, 1991.

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GAO discussed the Internal Revenue Service's (IRS) efforts to develop a new form for taxpayers to use in applying for the earned income tax credit. GAO noted that: (1) IRS set up a special task force to develop the new form, solicited comments outside of the usual channels, and tested the clarity and simplicity of the forms and instructions by using focus groups; (2) based on comments IRS received from the public and focus groups, it made a number of changes to the initial version of the form; (3) individuals experienced in filling out their own tax returns comprised the focus groups, because taxpayers inexperienced with filling out their own returns provided few useful comments; (4) IRS has increased its efforts to inform potential recipients about the credit, by distributing materials to interested groups and using these groups as integral parts of its information and outreach program; and (5) new IRS returns processing procedures are likely to limit the number of taxpayers who will receive the credit and could result in taxpayers who qualify for the basic credit either not receiving it or receiving it late. GAO believes that: (1) the complexity of the new tax form could dissuade some eligible taxpayers from completing the form and getting the credit; (2) information on the tax return is sufficient for IRS to determine a taxpayer's eligibility for the basic credit; and (3) a separate tax form is not really necessary.

Matter for Congressional Consideration

  1. Status: Closed - Implemented

    Comments: The recently passed OBRA 1993 eliminated both the health insurance and young child credit. Therefore, the interactions are gone as well.

    Matter: Congress should reduce many potential complications by deciding to eliminate the interactions among the credits which appear to amount to a fraction of a percent of credit payments.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: IRS continues to use the schedule, but it is a simpler schedule than the one that was the subject of the recommendation.

    Recommendation: IRS should reconsider the requirement for a separate schedule.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  2. Status: Closed - Implemented

    Comments: IRS is not giving the credit without the form.

    Recommendation: IRS should change its procedures to allow payment of the credit to eligible individuals who do not submit the extra form, if it continues to be used.

    Agency Affected: Department of the Treasury: Internal Revenue Service


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