Columbia Journal of Tax Law
The Earned Income Tax Credit ("EITC") is the largest US. welfare program, with twenty-four million low-income Americans receiving $60 billion of disbursals in 2009. Through the EITC, working Americans with little or no tax liability can receive up to nearly $6, 000 in refundable tax credits each year. Over the past two decades, policymakers have increasingly favored the EITC over direct-transfer welfare programs, citing its lower administrative expense (as recipients "self-certify" by filing taxes) and incentives for recipients to work. Despite its political appeal, the EITC suffers deep structural flaws. Largely because EITC claimants have little guidance in navigating the difficult filing process, they are subject to high rates of IRS audits and rescission of benefits with penalties and interest. This proliferation of EITC-related controversies has created an immense need for legal assistance, yet low-income tax law largely remains a peripheral concern within the legal aid community. In this article, we suggest a comprehensive and achievable set of reforms that the IRS and legal services organizations can enact to improve the EITC's efficacy and fairness. We first describe how the complexity of EITC eligibility criteria creates a tremendous burden for low-income Americans, as they frequently lack advice in tax filing and cannot afford legal representation in the event of a controversy with the IRS. We then outline measures that the IRS should implement to make the EITC more accessible and understandable to those qualifying for the credit, reducing the chance of an audit and loss of benefits. In particular, we focus on improving the tax filing process, making EITC audits more manageable for recipients, instituting less adversarial procedures for EITC-related Tax Court proceedings, and changing certain organizational structures within the IRS. Finally, we propose several practical ways that the legal aid community can enhance its support of EITC recipients confronting an IRS audit or Tax Court action. Most importantly, we argue that EITC assistance warrants greater Congressional funding and higher strategic and budgetary priority within legal aid organizations, given that the EITC is now far larger than the direct-transfer welfare programs on which legal aid lawyers have traditionally focused.
Adam S. Chilton, Jonathan P. Schneller & Joshua L. Boehm, "The Earned Income Tax Credit, Low-Income Workers, and the Legal Aid Community," 3 Columbia Journal of Tax Law 176 (2012).