EITC

Department of the Treasury

Internal Revenue Service

www.irs.gov

Publication 4138 (Rev. 1- 04)

Catalog Number 35586Z

www.irs.govInternal Revenue ServiceDepartment of the Treasury

Earned Income Tax Credit

Information for the Tax Return Preparer

Improving the Accuracy of EITC 

Prepared Returns

The IRS needs your help

EITC

Filing returns

electronically

can eliminate

many errors

associated 

with EITC.

If you would

like more information please

note this on the

attached card

and return.

PLACE

POSTCARD

HERE

STAMP

Complete both sides and mail to the address below

T H EI NTERNAL

REVENUESERVICE

(IRS) IS COMMITTED

TO PROVIDING TAX-

PAYERS WITH THE

INFORMATION AND

TOOLS THEY NEED

TO PREPARE TIMELY,

ACCURATE AND COM-

PLETE TAX RETURNS.

WE CONSIDER THE

PROFESSIONAL RETURN

PREPARER COMMUNITY

A VITAL PARTNER IN

HELPING US ACHIEVE

THIS GOAL

.

Return address (please print)

Due Diligence Requirements

Paid preparers who file EITC returns or

claims for refunds for their clients must 

meet four due diligence requirements. 

Those who fail to do so can be assessed 

a $100 penalty for each failure

.

As a paid preparer you must:

❍ Complete Form 8867, Paid Preparer’s 

Earned Income Credit Check list, or 

your own form as long as it provides 

the same information.

❍ Complete the appropriate EIC worksheet found in the instructions for 

Forms 1040, 1040A, and 1040EZ or 

in Publication 596, or your own work

sheet as long as it provides the same 

information.

❍ Have no knowledge or reason to 

know that any information used to 

determine the taxpayers eligibility for 

the credit and the credit amount is 

incorrect. Preparers must make reasonable inquiries of their clients, if the 

information appears to be incorrect.

❍ Keep Form 8867 and the EITC worksheet (or the equivalent of each), 

and a record of how, when and from 

whom the information used to prepare 

the checklist and worksheet was 

obtained. Preparers must keep these 

documents for three years from June 

30th following the date the return or a 

claim for refund was presented to the 

taxpayer for signature.

To: Internal Revenue Service

Atlanta, GA 30308-3539401 W. Peachtree St.W:CAR:SPEC:FO:OA-Stop 54WI
Information

Information you should know 

about potential errors

EITC errors can potentially delay or even result in

denial of the EITC portion of a taxpayer’s refund.

• Duplicate Taxpayer Identification Numbers for

EITC qualifying children account for a significant

number of processing return errors. These types 

of errors occur when the Social Security Number

of a child is used on multiple returns claiming

EITC. Potential causes include:

• Divorced or separated parents claiming the

same qualifying child.

• Two persons living in the same household 

who claim the same qualifying child.

• Persons using stolen social security numbers

and names.

• Persons sharing the same social security

numbers and names. 

• Other errors occur when there is a miss-match

between dependent information on the return 

and the dependent database. This database is an

application that adds external databases to internal data and applies a comprehensive set of rules

to score returns. Potential causes that trigger/

break these rules include:

• Incorrect name or birth-date used for 

qualifying child.

• Non-custodial parents who claim the EITC,

• Non-custodial parents who do not qualify for

the EITC, filing electronically before the custodial parent, which causes an electronic rejection

of the taxpayer who is entitled to the credit.

To avoid these errors look at the Social Security 

card for the child(ren). Be sure to check for the

correct name and social security number and ask

where the child resides. The first and last names of

the child(ren) as well as the birth date must match

the Social Security Administration’s records.

Please check all that apply❍ Please contact me❍ Iam interested in obtaining EITC materials❍ Iam interested in information about electronic filing

I have questions about EITC

❍ recertification ❍ due diligence ❍ qualifying child ❍ other

The best time to reach you is between the hours of ___________ and ___________ on __________ (dates and days) ___________ or other ___________ Name _____________________________________________________________________Phone number _____________________________________________________________Email address ______________________________________________________________

Form #13388 Catalog # 356071OMB # 1545-1825

We need your help in ensuring that the EITC is determined

correctly for the eligible taxpayer.

Recent tax law changes for EITC

Definition of earned income: For tax years beginning

after 2001, earned income no longer includes employee

compensation that is nontaxable.

Some examples of nontaxable compensation are:

• Military employee basic housing and subsistence

allowances and combat zone compensation;

• Salary deferrals such as 401(k) and Thrift Savings 

Plan contributions; and

• Excludable employer-provided benefits, such as 

dependent care benefits.

Elimination of modified adjusted gross income (AGI):

Taxpayers no longer need to figure modified AGI. 

The EITC is figured using AGI, not modified AGI.

Rules for persons with same qualifying child (tie-breaker

rule): The tiebreaker rule applies only when more than

one taxpayer actually claims the EITC on the basis of the

same qualifying child. In these cases, the law sets forth

rules to be used to determine which person can claim the

EITC on the basis of that child.

Residency requirement for qualifying child:

In all cases, the child must live with the taxpayer for 

more than half the year in the United States.

Reduction of EITC by alternative minimum tax is eliminated.

Break for joint filers: The income amounts at which the

phase-out begins and ends will increase by $1000 for

taxpayers filing as “married filing jointly.”

NOTE:

If you determine a taxpayer does not qualify for the EITC

but may appear to by the information given on the tax

return, remember to indicate “No” directly to the right of

line 64 on Form 1040 or line 41 on Form 1040A. This

will prevent a notice from going to the taxpayer to determine if they are eligible to claim the EITC.

INCORRECT FILING STATUS REMAINS A SIGNIFICANT CAUSE FOR EITC

OVERCLAIMS. MARRIED TAXPAYERS MUST FILE AS MARRIED FILING

SEPARATELY OR MARRIED FILING JOINTLY UNLESS THEY MEET THE SPECIAL

HEAD OF HOUSEHOLD RULES FOR MARRIED PERSONS. A MARRIED TAXPAYER CANNOT FILE AS SINGLE.

• If the EITC was denied or reduced as a result of a

mathematical or clerical error, do not attach Form

8862 to the next tax return.

• If Form 8862 is required and it is not attached, any

EITC claimed will be denied.

NOTE:

If it is determined that the taxpayer’s EITC claim

was denied due to reckless or intentional disregard

of the rules, then the EITC cannot be claimed for

the next two years. If it is determined that the claim

was due to fraud, then the EITC cannot be claimed

for the next 10 years.

Additional Resources

For more information on the EITC, return the attached

card to the address specified. Indicate what information

you need and someone from the nearest IRS office will

contact you. Please complete all of the requested information so that we can provide assistance.

RECOMMENDED SOURCES OF 

EITC INFORMATION INCLUDE:

• Publication 596, Earned Income Credit

• Publication 3107E, EITC A Tool Kit for Professionals.

• Web site www.irs.gov/eitc 

You may download IRS forms, publications and other

tax information from the IRS web site at www.irs.gov.

You may also call the IRS at 1-800-829-3676 to place

your orders.

Attend one of the annual Tax Forums hosted by the

IRS every summer. Information on upcoming forums

can be found at www.irs.gov.

PAPERWORK REDUCTION ACT NOTICEWe ask for information on this form to carry outthe Internal Revenue laws of the United States.Your response is voluntary. Your are not required to provide the information requested on a formthat is subject to the Paperwork Reduction Actunless the form displays a valid OMB controlnumber. Books or records relating to a form or itsinstructions must be retained as long as their contents may become material in the administration of any Internal Revenue law. Generally, tax returnsand information are confidential, as required byCode Section 6103. The time needed to complete this form will varydepending on the individual circumstances. Theestimated average time is 3 minutes. If you havecomments concerning the accuracy of this timeestimate or suggestions for making this form simpler, we would be happy to hear from you. Youcan write to the Tax Forms Committee, WesternArea Distribution Center, Rancho Cordova, CA95743-0001.

TAXPAYERS WITH NO CHILDREN CAN QUALIFY

Taxpayer’s who do not have a qualifying child are

eligible for the EITC if additional conditions are met:

• They must be at least age 25 but under age 65

• Have earned income less than $11,230 ($12,230 

if filing jointly)

• Have a valid Social Security Number 

• Cannot be the qualifying child of someone else

• Must have lived in the United States for more than 

half of the tax year

• Must not qualify as a dependent of someone else

• Must not be filing a Form 2555

Recertification for EITC disallowance

If the taxpayer’s EITC was denied or reduced for any year

after 1996, you will need to complete an additional form

to claim the credit for 2003.

• If the EITC for tax year 2002 was denied or reduced

solely because one or more children were determined

not to be the taxpayer’s qualifying child, attach Form

8862 to the next year’s tax return on which the taxpayer

claims the EITC based on one or more qualifying

child/children. Whether it is the same child(ren) previsouly disallowed.

• If the EITC was denied or reduced for tax year 2001 or

an earlier year for any reason, or if the EITC was denied

or reduced for tax year 2002 for a reason other than a

determination that one or more children were determined not to be the taxpayer’s qualifying child, attach

Form 8862 to the next year’s tax return on which the

taxpayer claims the EITC.