{"id":17497,"date":"2025-06-29T21:33:51","date_gmt":"2025-06-29T21:33:51","guid":{"rendered":"https:\/\/finderica.com\/?p=17497"},"modified":"2025-06-29T21:33:51","modified_gmt":"2025-06-29T21:33:51","slug":"is-the-proposed-eitc-pre-certification-a-good-idea-or-bad","status":"publish","type":"post","link":"https:\/\/finderica.com\/?p=17497","title":{"rendered":"Is The Proposed EITC Pre-Certification A Good Idea Or Bad?"},"content":{"rendered":"\n
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\"EITC<\/div>
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EITC – earned income tax credit acronym business concept. vector illustration concept with keywords … More<\/span> and icons. lettering illustration with icons for web banner, flyer, landing page, presentation<\/span><\/p>\n

<\/fbs-accordion>getty<\/small><\/figcaption><\/figure>\n

The Senate\u2019s version of President Trump\u2019s favored massive tax and spending bill had looked to add something to the tax code\u2019s Earned Income Tax Credit. The EITC has been a broadly popular measure for the past 50 years as a mechanism that helps low-income workers.<\/p>\n

There are admitted problems with the program that can lead to a high percentage of incorrect filings. The Senate wanted to require pre-certification by the IRS each year. However, critics point to some issues this would create.<\/p>\n

What The EITC Is<\/h2>\n

Taxes on low incomes, even if a relatively low percentage, can feel devastating because there is so little money to begin with. Under 2025 tax brackets, a $25,000 income would incur income tax of $2,761.50. Federal payroll taxes for those making less than $200,000 a year are 15.3%. The worker\u2019s portion is 7.65%, so another $1,912.50 for a total of $4,674 in taxes, leaving the worker with $20,326.<\/p>\n

The EITC is a refundable tax credit, which means people eligible for it can get a tax refund larger than what they pay in taxes. This is not a bug but an intentional feature to help low-income families.<\/p>\n

As the Tax Foundation explains<\/a>, the credit was enacted in 1975 to \u201coffset income and payroll taxes for low-income workers\u201d because they were paying out significant portions of their low incomes. The intent was to reduce poverty while promoting work, instead of offering a welfare check.<\/p>\n

\u201cResearch indicates that the EITC has successfully promoted work over receipt of means-tested benefits<\/a>,\u201d wrote Scott Winship at the American Enterprise Institute.<\/p>\n

Problems With The EITC<\/h2>\n

There are some significant problems with the EITC structure. The IRS says that about a third of EITC claims are paid in error<\/a>. Some of the errors are \u201cintentional disregard of the law.\u201d Others \u2014 many, as tax experts have told me \u2014 are unintentional and the result of the law\u2019s complexity.<\/p>\n

Some of the common errors include claiming a child who doesn\u2019t qualify (having children isn\u2019t a requirement for the credit), more than one person claimed a child, Social Security numbers or last names don\u2019t match, someone is married but filed as single head of household, and underreporting income or overreporting expenses.<\/p>\n

According to the Tax Foundation, the EITC can distort people\u2019s incentives, including a marriage penalty in which unmarried couples filing individually have lower taxes than married couples, disparities between workers with and without children, and even work disincentives in a phaseout stage in which higher incomes see lower payments.<\/p>\n

In addition, there is criticism of the once-a-year approach of the EITC, as it leaves people sweating much of the time.<\/p>\n

EITC Pre-Certification<\/h2>\n

The pre-certification proposal doesn\u2019t address many criticisms of the program. As Alice Lin at Georgetown Law\u2019s Center on Poverty and Inequality wrote, the bill would hold refunds for months for certain EITC taxpayers starting in 2026 if there was a competing claim for a child. (Back to one of the common error types, which often can be a misunderstanding of the rules and not an intentional dodge.)<\/p>\n

Under a new pre-certification program in 2028, all EITC taxpayers would have to submit documents annually proving eligibility. \u201cMoreover, this puts the timing of taxpayers\u2019 refunds at the mercy of what other taxpayers did,\u201d Lin wrote.<\/p>\n

Janet Holtzblatt at the Tax Policy Center noted that the George W. Bush administration tried a pre-certification pilot<\/a> that required third-party documentation. It was \u201cfar less efficient in stopping erroneous refunds than the IRS\u2019s practice of freezing refunds and contacting people after they have filed a tax return with a suspicious-looking credit.\u201d There were also \u201csubstantial burdens\u201d that eligible claimants had to bear.<\/p>\n

\u201cThe IRS determined that its current methods stopped more erroneous payments relative to the agency\u2019s administrative costs,\u201d Holtzblatt wrote. \u201cConsequently, the IRS rejected precertification.\u201d<\/p>\n

Would it be better this time? Maybe, maybe not, but given that congressional Republicans are looking to cut funding to the IRS, how is the extra work supposed to get done? It probably isn\u2019t, so perhaps the wise move is to avoid imposing a program on what has been an underfunded agency, and probably will be even more so, when something similar has been unsuccessfully tried before.<\/p>\n<\/div>\n

Source link <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

EITC – earned income tax credit acronym business concept. vector illustration concept with keywords … More and icons. lettering illustration with icons for web banner, flyer, landing page, presentation getty The Senate\u2019s version of President Trump\u2019s favored massive tax and spending bill had looked to add something to the tax code\u2019s Earned Income Tax Credit.<\/p>\n","protected":false},"author":1,"featured_media":17498,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"rank_math_lock_modified_date":false,"footnotes":""},"categories":[196],"tags":[368,7097,40,2911,7098,4213],"class_list":{"0":"post-17497","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-finance-news","8":"tag-bad","9":"tag-eitc","10":"tag-good","11":"tag-idea","12":"tag-precertification","13":"tag-proposed"},"_links":{"self":[{"href":"https:\/\/finderica.com\/index.php?rest_route=\/wp\/v2\/posts\/17497","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/finderica.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/finderica.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/finderica.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/finderica.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=17497"}],"version-history":[{"count":0,"href":"https:\/\/finderica.com\/index.php?rest_route=\/wp\/v2\/posts\/17497\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/finderica.com\/index.php?rest_route=\/wp\/v2\/media\/17498"}],"wp:attachment":[{"href":"https:\/\/finderica.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=17497"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/finderica.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=17497"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/finderica.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=17497"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}