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With the new Democratic Administration coming in as well as concerns for the next round of assistance for folks hurt by the pandemic, we are hearing more support for an increase and expansion of the Earned Income Tax Credit. Although basically in favor of this, I have some mixed emotions.
As far as the “good” is concerned, I think it’s terrific that Congress is taking into consideration the needs of the working poor, the families where there are one or two persons working 1 to 3 jobs, just to make ends meet, and usually falling short. Without trying to demonize the folks who are not working and in that category, the reality is that these folks need our help and deserve our help. I’m glad that there is a chance it will be improved.
The “bad” relates to semantics. Since the time I recall being in the 1980s, when Ronald Reagan introduced us to his “welfare queen,” welfare has become a four-letter word in this country. The reality of the Earned Income Tax Credit, however, is that it is a form of welfare, pure and simple. I find it sad that our politicians do not have the courage to say welfare can be a good thing, and we are going to provide it. Instead, they give us the Earned Income Tax Credit, which leads me to the “ugly.”
I have been a tax lawyer for almost 50 years, and I am hard-pressed to think of a part of the Internal Revenue Code that is more difficult to follow. I have represented individuals who claimed Earned Income Tax Credit and were challenged by the IRS. It’s a situation where quite frankly, I have yet to find one who claimed it in bad faith, while some were entitled to it and others weren’t. Sadly, from time to time, the Congress that can’t write a clearer statute about this benefit has suggested that the IRS needs to come down harder on the people claiming the Earned Income Tax Credit as well as their return preparers. I have also assisted return preparers, basically small operations, definitely not anyone from the “Final Four,” who have attempted to navigate this difficult series of provisions with varying degrees of success. I have seen some very ugly situations because of aggressive behavior on the part of some Internal Revenue Agents, unlike the many dedicated public servants who are simply trying to do their job.
Frankly, I would like to have a competition set up where one member of the House Tax Writing Committee and one member of the Senate Tax Writing Committee would be given the opportunity to complete 5 problems involving application of the Earned Income Tax Credit, to be submitted by the accountants who are attempting to navigate it. I’d be surprised if those individuals got 1, let alone all 5, of the answers right.
In other words, there is something very good here, but we have the opportunity to make it better. What do you think the chances are that Congress will do that?
George Connelly is recognized as one of the leading federal tax litigators in the United States. His practice focuses on IRS audit, collection and criminal matters including civil and criminal tax litigation matters, for clients ...