EITC Audit — Why the IRS Targets This Credit
EITC claims are audited at roughly 5-6 times the rate of returns with comparable income but no EITC. If you claim this credit, understanding why — and how to protect yourself — saves real headaches.
Make sure you qualify before filing with the EITC Calculator.
The Numbers
| Return Type | Audit Rate |
|---|---|
| Returns with EITC | ~1.0-1.3% |
| Returns without EITC (similar income) | ~0.2% |
| Returns over $1 million income | ~1.1% |
Low-income EITC filers are audited at nearly the same rate as millionaires. The IRS has acknowledged this disparity but continues the practice because EITC has a high estimated improper payment rate.
Why the IRS Focuses on EITC
Estimated error rate: 25-30%. The IRS estimates that roughly $18-21 billion in EITC payments are improper each year — mostly due to:
- Qualifying child errors (40% of improper payments) — Children not meeting the residency test
- Income misreporting (30%) — Unreported self-employment income or inflated income
- Filing status errors (15%) — Married couples filing as single/HoH
- Mathematical errors (15%) — Wrong calculations or transcription mistakes
Most errors are unintentional. Families don't realize their child doesn't meet the "more than half the year" residency test, or they misunderstand self-employment reporting.
What Triggers an EITC Audit
The IRS uses automated screening. Red flags include:
| Trigger | Why |
|---|---|
| Self-employment income near the EITC peak | Income that perfectly maximizes the credit looks suspicious |
| Inconsistent filing | Claiming children one year but not the next |
| Multiple filers claiming same child | Two people using the same child's SSN |
| Round numbers on Schedule C | "$10,000 revenue, $2,000 expenses" with no receipts |
| High EITC relative to W-2 income | Large credit with very little employer-reported income |
| Return prepared by a flagged preparer | Some preparers have high error rates |
The self-employment trigger is the big one. If you report exactly $17,400 in Schedule C income (the amount that maximizes the EITC for 3 children) with no corresponding 1099s, expect scrutiny.
Types of EITC Audits
Most EITC audits are correspondence audits — conducted entirely by mail. You won't sit across from an IRS agent.
What happens:
- You receive a notice (CP75 or Letter 566) requesting documentation
- You have 30 days to respond with proof
- The IRS reviews your documents
- You receive a determination — credit allowed, partially allowed, or denied
Documents commonly requested:
| What They Want | What to Send |
|---|---|
| Proof child lived with you | School records, medical records, childcare records, lease, letter from school/landlord |
| Proof of relationship | Birth certificate, adoption papers |
| Self-employment proof | Business records, receipts, bank statements, client contracts |
| Filing status proof | Divorce decree, separate address documentation |
How to Protect Yourself
Keep records throughout the year, not just at tax time:
- School enrollment letters showing your address and child's attendance
- Medical visit records listing the child's address
- Lease or mortgage showing where you and the child live
- Daycare/childcare receipts with dates
- Self-employment records: bank deposits, invoices, expenses with receipts
If you're self-employed, use a separate business bank account. A clear trail of deposits and expenses is your best defense.
Avoid preparer fraud. Some tax preparers inflate self-employment income to boost EITC (and their preparation fees). If a preparer suggests adding "extra income" to get a bigger credit, find a different preparer. You're responsible for your return — even if a preparer made the error.
If You're Audited
- Don't panic. Most EITC audits are resolved by mail with documentation.
- Respond on time. You have 30 days. Missing the deadline means automatic denial.
- Send copies, not originals. Never send original birth certificates or Social Security cards.
- Use certified mail or fax with confirmation. You need proof you responded.
- If denied, you can appeal. You have the right to request a conference with the IRS Independent Office of Appeals.
Free help: Low Income Taxpayer Clinics (LITCs) provide free legal assistance for EITC audits. Find one at taxpayeradvocate.irs.gov.
The Two-Year EITC Ban
If the IRS determines you claimed the EITC recklessly or intentionally disregarding the rules (but not fraud), you're banned from claiming EITC for 2 years. If it's determined to be fraud, the ban is 10 years.
Even honest mistakes can look reckless if you can't provide documentation. This is another reason to keep records — protecting your ability to claim the credit in future years.
The ban applies even if your situation changes. If you were banned in 2025, you can't claim EITC for 2025 or 2026, even if you clearly qualify in both years.
See your overall tax picture with the Federal Tax Calculator.
Share this article