Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, February 9, 1995 TAG: 9502090093
SECTION: NATIONAL/INTERNATIONAL PAGE: A-1 EDITION: METRO
SOURCE: Knight-Ridder/Tribune
DATELINE: WASHINGTON LENGTH: Medium
``You just can't have this many poor people depending on this money and have it not be there - it's like saying we're not going to pay welfare this month,'' said Harry Buckley, president of H&R Block Tax Services Inc.
The problem involves the Earned Income Tax Credit, a cornerstone of President Clinton's effort to ``make work pay'' for low-income families.
The EITC is a government payment to the working poor administered through the income tax system.
Working people with children can get EITC money even if they don't make enough to pay income taxes. This tax season, the maximum credit for a family with two or more children is $2,528. Families with one child can get up to $2,038. Childless workers with very low incomes can qualify for up to $306.
In Virginia, 339,799 taxpayers in 1993 filed for $351 million in EITC payments.
People count on their EITC check to help pay bills or provide a little breathing room in tight budgets.
The EITC, which more than 15 million families received last year, also has a history of overpayments and outright fraud. At congressional hearings last year, IRS and Treasury officials warned that a crackdown was coming.
Beneficial National Bank, which makes refund-anticipation loans to EITC recipients, has received over 1 million calls from concerned customers, said Beneficial lobbyist Gary Perkinson.
``These are real taxpayers, and they are getting harmed,'' said Perkinson. ``The industry is also getting harmed, because they are losing millions of customers.'' The EITC is an estimated $350 million-a-year line of business for the tax-preparation industry.
The IRS said Wednesday that all returns - not just those claiming the EITC - are being checked more carefully. As a result, about 7 million out of 86 million refund requests will be delayed. A large number of the delays are expected to involve low-income workers claiming EITC.
Beneficial Management Corp. Vice President Ross Longfield said about one-third of the EITC claims handled by his company already in this tax season had been delayed for further checking by the IRS, affecting 60,000 families.
``It could affect millions of people eventually,'' said Longfield. ``It appears that what they're doing is a wholesale withholding of refunds.''
Longfield said the IRS had told some tax filers they could face an eight- to 12-week wait for their EITC claims to be resolved.
Most of the disputed claims involve computerized tax returns. In past years, taxpayers filing electronically had to wait only two or three weeks for their money.
IRS spokesman Anthony Burke said he had no information on delays involving the EITC. He said the IRS warned tax preparers it would be checking EITC claims more carefully this year for incomplete or inaccurate information.
A spot check of 1,100 returns claiming the EITC last year found 29 percent of taxpayers claimed too large a credit, and 13 percent appeared to have overclaimed intentionally.
Begun in 1975, EITC is popular with liberals and conservatives alike and has been greatly expanded under Clinton. The program is expected to cost the government $19.6 billion for the 1994 tax year.
by CNB