Overview

The Earned Income Credit (EIC) is a refundable tax credit that has a significant impact on United States revenue, with EIC claims in any year totalling more than $68 billion. EIC claims are also increasing in number and amount. In the ten year period ending in 2016, the number of EIC claims increased from 24.6 million to 27.4 million, an increase of 11.4%. 

The combination of an increased number of EIC claims coupled with an increase in the average credit caused the total amount of EIC claimed to climb by 37.5% over the 10 year period ending in 2016,  from $48.5 billion to $66.7 billion. In a recent year, 150.3 million individual federal tax returns were filed, and 27.4 million—18.2% of individual taxpayers—claimed the Earned Income Credit. Based on that percentage, it would not be unexpected that approximately one taxpayer in every five may claim the EIC.

Learning objectives

Upon completion of this course, you should be able to:

• Apply the earned income credit rules to determine if a taxpayer is eligible for the tax credit; 
• Identify the common errors committed in connection with the earned income credit;
• Describe the consequences of the IRS’ disallowance of the earned income credit; and
• Recognize the tax return preparer’s EIC due diligence requirements.