$14.5 B Tax Refunds Issued By "error"

I'm going to assume that you mean "insightful", as in a more intelligent and reasonable post, instead of a play on the word "incitement."

The EITC (prior to being a refundable credit that started in 2009 tax year) was there as an incentive for people to work by having a job. What it did was it provided a non-refundable tax credit against the amount of taxes you owed. It was limited by the amount of taxes you actually owe, and if the credit itself was higher than the tax owed, you didn't get the balance due back.

When it changed to a refundable credit, it was basically the same thing except it lowered the wage limit one would have to be paid in order to claim the credit, and it opened the credit up for fraud.

Now people can lie to the federal government on the amount of wages they receive (and since most of the fraud occurs to people who are not paid by W-2 wages, but by 1099 wages, and not every company complies with the 1099 reporting rules, either on purpose or by lack of knowledge) and get to that magical amount where they can claim the largest credit. There has been cases where fraudulent returns are prepared rapidly using SSNs of people who's IDs were stolen, but the checks are mailed to a central location and cashed on the spot. The government cannot recover that money because these locations change too rapidly and often before the fraud is discovered.

This is a major issue, one that should either revamp the internal controls of the credit usage or completely remove it and replace it with the older system of non-refundable credits.

*slow clap* you caught that play on words, but did mean something to entertain me, so either way you take it works.

But really, you can do better, seems a bit copy pasted. You are on the right track, you can do it!

Seriously, that the best you can come up with?

You are here to dance for my entertainment, not the other way around.

"Dance, monkey, Dance!"

But fine.

You were close with the 1099, and the fraud is rampant due to 1099, both in the described identy theft and also in just straight up false reporting of income. It allows filers to play with their income to get to the sweet spot. I'm sure if all filings were scrutinized the figures would be much higher, but that would cost more money.

Somehow I think you are trying to piece words together to make a sentence. I mean, it's pretty obvious that you don't know what you are talking about, especially when you are disagreeing with me by agreeing with me........

On the side note, here is a little tidbit that most people do not know about, and you have to be in the industry (or IRS) to know this:

There is no check in the IRS database to match a 1099 to the SSN. In other words, IRS has no flag in their system to match what is reported on Line 1, Schedule C/Line 21, Form 1040 against all filed 1099s under your SSN.

This is common knowledge in the industry because there are multiple ways to report income from 1099s, and even then, not all income is reported by 1099s (it would be impossible to do so, as you would have to issue out 1099s to everybody you ever paid, and even for a small sole-proprietorship who only makes 1 sale per week, could lead to hundreds, if not thousands, of individual payments per year).

IRS relies a whole lot on banks to substantiate expenses during an audit. That and properly kept books. But IRS can't tell the difference between fraud and actual.

It's odd to hear conservatives of all people criticizing a program that has gotten so many people to work. I mean, that fact alone is the reason that the EITC has received the overwhelming bipartisan support that it has since being introduced. Regardless of how you feel about helping out the disadvantaged, it is clearly preferable for someone to work and receive a small amount (relative to personal support) of assistance than it is to depend entirely on welfare. We're talking about 3.9 million families each year who would otherwise be relying on welfare for all of their support. That's a lot of money lol

This is true even if you put aside the purpose of the EITC, which is set up in such a way that it is always advantageous to seek out more, higher-level work. Even when you move into the phase-out stage and stop receiving the credit, your yearly income is still greater than if you had worked less.

As for fraud, yeah that definitely happens. I would venture to say it happens about as often as with people on the opposite end of the income spectrum. :P On that note though, about a fourth of the people who rightfully qualify for the credit don't even claim it. This more than counteracts the fraud; the projected amounts for EITC aren't being reached, let alone exceeded. The IRS has also started auditing a random selection of EITC claimants to cut down on fraud.

This is a tangent, but a lot of that fraud is also coming from the... trailer variety of commercial tax preparer. You know, the people who set up shop every year and inflate people's returns so they can charge a higher fee before disappearing into the night. Sometimes the taxpayers are in on it, but not always. In either case, they're the ones liable when the IRS comes a callin'.

It's obvious and other people have already explained this, but most of the money given to people who qualify for these credits goes straight back into the economy for goods and services. I agree that there is abuse and fraud rampant with these programs, just in my personal experience, but they do serve a useful purpose.

I said u were close, kinda glossed over false personal filings and focused right on the fake filings. The fake filings are part but not all.

Also my grammarz are 1337 skillz for the interwebs, bra. Your idiocy shows more and more king everytime you try to run your argument based on some ones grammar, rather then you know, facts.



this program gets no one to work that wouldn't work anyways. The welfare leeches will still be the welfare leeches, and just have a friend/ relative claim their kids as dependents.

Explain how issuing a refundable credit got people to go to work.

I believe this is the third time I asked this very question. Maybe this time you would answer it.

I'm still trying to find the point in this refundable credit. I don't see how this very limiting credit encourages people to work in a job that pays at minimum wage while raising 3+ kids. It just doesn't make sense.

If you wanted to encourage more people to work, especially in higher quality fields, you would give bigger benefits for lower to medium income families, where it starts phasing out at a higher amount (not something stupid small like $15k for Single w/o children), but more like $40k ($80k MFJ) without regards to family size.

This credit encourages people to take claims on their returns that they shouldn't have. Part of the fraud is that people are claiming children on more than one return in hopes of claiming the credit more.

I highly doubt that.

Assuming that each fraudulent return was for the max credit amount ($6,143), that's still 2,360,410 fraudulent returns filed. I will give you the benefit of the doubt and say that not every fraudulent return done by one person, and multiples of these returns were done multiple times, but I wouldn't doubt that the average number of fraudulent returns done by one person would be in the high teens, so that's still over 100,000 people scamming the system.

There is no way in hell that 100,000 people on the "opposite end of the income spectrum" would do this, the government would be bankrupt in a literal sense.

But I'm sure that you will say that every filer who is classified as one of the top 10% taxpayers are all frauds because they earn XX% of the world's income or some other idiotic *** like that. So let's get that stupid argument out of the way already.

More like organized crime than commercial tax professionals.

Let's go ahead and get this out in the open.

Do you consider a refund of an overpayment to be a stimulus?

The EITC is, on the surface, an incentive to get people to work, as its value is based on your income. You only make 10k a year? You don't get much. The largest benefit from it lies somewhere in the 25-32k/year income range, if I recall correctly; it's been a few years since I had a glance at the worksheet. It also increases based on the number of qualifying children you have.

However: most people who are in that income bracket would likely be far better off if they claimed exemption from federal income taxes entirely, because using the standard deduction + exemptions based on number of dependents, your tax liability is going to be zero to begin with. Plus, lower income folks are unlikely to itemize, as the standard deduction is going to be far higher than you'd have if you added up the random crap that you can deduct.

If your tax liability is zero, you're essentially giving the government an interest-free loan that they pay back when you file. This is not counting flat-out credits that one can receive, such as the two listed in the OP. Even if you claim exemption from paying, if you fit this criteria, you're gonna get a chunk of change come tax time.

Note: Don't do this if you aren't sure you won't owe.

Disclaimer: I'm not an accountant.

Regarding fraud: in these times, you'd be hard-pressed to find any government-sponsored program that people DON'T try and defraud. Humans will be humans. The fact that they cannot crosscheck 1099s and there's no liability even for low or non-paid preparers doesn't surprise me, but I think it should be fixed.

Also, re: welfare: how the hell anyone can survive on that is beyond me. In the state I live in, a single mother and her child, last I heard, received $217 a month. That doesn't even pay for gas to look for a job.

Incorrect. The personal exemptions are still received regardless if you claim EITC or not. You do not lose the personal exemptions if you claim either the refundable or non-refundable credit.

Partially incorrect. Whatever you overpay is what you are giving a tax-free loan. You can pay in $200k in taxes and only owe $100k, that overpayment of $100k is the interest-free loan amount you gave to the government.

Now, if you owe taxes and do not pay in full by April 15th, IRS can and will collect interest and possibly penalties on the amount you owe. If you have an overpayment and file by October 15th (or even beyond, up to 3 years after the original filing deadline), IRS does not give you interest on that amount.

There is more benefits than that. Free housing, utilities, internet, food, and then the "welfare check" adds up to much more than $217 per month.

Never said you did. You get exemptions regardless if you take credits. The only thing that could change is the standard deduction, which is not used if you itemize.


This is right. But in these lower income brackets I was describing, everything you pay in is an overpayment. What you say about a tax liability is true, though in the case I was describing, the chances of you owing anything are so astronomically low that it's almost a non-issue.

Though, owing taxes does indeed suck, even should you get an extension.


Housing is sometimes on an extreme waiting list, so one must live with friends or family. Especially where I live, which is the back-*** of nowhere. Utilities are only included if you live in subsidized housing, instead of a Section 8 program where you choose your own house. Internet's a crapshoot out here. Food, I'll give you- you get food stamps, as well as child care.

I'm not going to derail this thread with a breakdown of welfare, though- if you wish to discuss that I'll be happy to do so in another thread.

Usually when people *** about welfare recipients, what they really mean is SSI Disability recipients. That is substantial, scales with dependents, and lasts a very long time. Then you add on food stamps, Section 8/other public housing, energy bill assistance, public health insurance, child support, free day care, education assistance, and so on. Now you're talking about a "sweet spot" where you can have a better lifestyle on the dole than you would working, and get to sit on your butt besides.

I'm extremely liberal and believe in social justice but abuse of these programs is a well-known fact. It propagates from generation to generation, too, and has done major damage to the work ethic in urban and rural communities.


Not really, no. But we aren't talking about overpayments, we are talking about straight credits.

Sorry, the way you worded the quoted statement sounded like that.The only arguments made by people apply to the total refund, not the refundable credit.

However, this credit does not benefit the economy based on the fact that, in order for you to qualify for the credit, you must place yourself in a low income bracket. How is limiting production for the sake of a refundable tax credit beneficial to the economy? Wouldn't a true economic benefit arise from encouraging everyone to work, and not just to work at a minimum?

I could qualify for the EIC credit in about a month. Does that mean that I should stop working for the rest of the year so I can benefit from the maximum amount of the credit?

If you truly want to create an economic stimulus, you would create what we had for tax year 2008, which is the "Making Work Pay Refundable Tax Credit"

Sometimes people don't have the opportunity to work for more than the minimum. Whether that opportunity is limited by education or other factors isn't precisely relevant to this discussion- the fact remains that many many people work minimum wage jobs.

Minimum wage isn't a living wage, not unless you live with someone to help with your expenses or you work more than one job.

I would dearly hope that people don't work just enough to qualify for max EIC and then quit....because that would be ridiculous.

Screw the rest of this thread. I want a moogle ATM card.

That's when people need to strive for something better. Minimum wage was never really intended to be a living wage, just a way to supplement one's income.

But if you don't like the position you are in currently, what is really holding you back from achieving something greater? The only person being held back is you, not me. Yes it's hard work, but that's life. Nobody gets anything for free anymore, you have to work hard for a better life.

I don't see why not. People out there work for minimal wages to prevent from exceeding an income limit which limits or erases their governmental benefits. It is a strategy very well known but never countered by oversight.

Sign me up for one too.

Were you on vacation King? We had a tax question in another thread. your absence was commented on.

I answered those questions just now, I didn't see that thread at all.

If Tax liabilty is 0, then Seeker's statement was 100% correct, you did not bother to read/ comprehend what you read.


This shows you have no idea about the EITC/ ACTC, These are not refunds of overpayments, these are not refunds at all, I pointed this out to you before, but alas you fail at reading.

I hope you don't work for H&R and thus consider yourself a tax pro... Hell why do you even bother commenting on stuff you know nothing about? No Copy Paste does not show you have knowledge of the subject just that you can Google.

edit: Fixed qoutes

So basically, you are saying that the only way the government gets an interest free loan from the taxpayer is if the tax liability that the taxpayer has is $0. In other words, any overpayment is not an interest free loan to the federal government by the taxpayer.

Maybe you should stop posting in this thread. It is pretty obvious that you have no clue as to what you are saying.

That is the second time you accused me of copy/paste tax knowledge. So, why not put your money where your mouth is. Prove that somebody else said the exact same thing I said about whatever you are accusing me of copy/pasting and also show the source of that too while you are at it.

Nice touch on the H&R bit though.

I give your trolling a 1.8/10. Not quite Flavin-level, but still as pathetic.

Oh, and if you want to know more about the EITC, Here's a good source on 26 U.S. Code §32 (hint: the "§" is a symbol for "section", so this is Code Section #32 of the US Code)

H&R "tax pros" can suck a big hairy ***.

The first, last, and only time I used their services (which they charged me 90 dollars for) was when I was 19, which one of their employees somehow declared I owed the government (my government, in Canada) 90 dollars, when I was owed money in it's place. For some reason, they compiled 3 tax years on me, in that year, when I was only liable for that year, and was in fact, owed money instead.

Now I do my tax reports myself, and have them double checked by my dad. Since he does the proper calculations.

You get what you paid for.

My firm charges a minimum of %750 per return, which goes up the more complex the return is.

A simple 1040 with, say, W-2s and 1099s, maybe a couple of K-1s and maybe a rent house would be $750. Add a sole proprietorship and it gets bumped up to $1k, but that also includes Texas Franchise Tax reports too. More complex it is, higher the price.

A business return is a little bit more tricky to price though. It really depends on how much work is needed to complete it to be honest.

But all that can cover you forever in tax planning, IRS responses, and even small desk audits. At least for the year in question.

The other thing about H&R is they have a clause that absolves them of any liability if something goes wrong, that they did to cause an audit or in case they do something that gets flagged as tax fraud.

Only people I can see actually benefiting from H&R Block's service are those who can't get free tax advice from upcoming and current professionals (VITA program), or people who don't understand that they can file online for free (IRS website has a link to that, it's shitty, but hey, it's free).

Just to clarify, is your objection to the refundable aspect of the EITC or to the idea itself? I would say the motivation is pretty clear cut.

If you're someone who views welfare as a better option than working a low-paying job for the same hopeless financial situation, what is going to change your mind? Something that puts a marginal amount of hope within your reach while tying it to the idea of employment.

Don't misunderstand. I don't mean to suggest that there are equal numbers of individual offenders on each side; just that people of all income levels are equally given to (and capable) of dishonesty. The people at the top have their ways just like the people at bottom--there just aren't as many of them. This is more of a response to the idea that poor people (or EITC claimants) are somehow more dishonest by nature than anyone else.etc.

Well that was uncalled for. This discussion is now substantially less interesting.


120% agreed. Since returning to the US, I've been working for a nonprofit that's trying to establish a few minimum standards of competence and oversight for some of these "businesses." Unfortunately, their lobbies are pretty strong in Alabama. In the meantime, we operate VITA sites around the state so people can more easily avoid them.

The free file system is defs shitty, but it works pretty well in a few situations where VITA's limited scope comes into play. There are a number of things we aren't allowed to file, but sometimes we can stand by and assist people as long as they input the information themselves.

Wow. Your an ... idiot. Going to keep it G.

So let me go full blown moron speak.

Tax money owed is 0 (0 liability)
Money taxman pay back to you = your loan to them.

0 tax liability, by logic, implies any and all refund monies were essentially a loan you made to the government. This was what seeker said, you [king] then made a counter point / example; in which you provided no new information, a worse example, and wasted words just to see yourself say the same thing as seeker in a round about manner. I never said your crap example was wrong, just that you like to not read/ comprehend.

Just do the universe a favor and stop speaking, writing, or expressing your thoughts in any way.

I also love how in the same paragraph you claim not to blindly copy paste; you instead just provide a link, which is essentially a lazy form of copy/paste.

You sir win at life, no really you do, not even kidding, no sarcasm here.

Heavy personal attacks in a thread about taxes? Stay classy.