The Effects of EITC Correspondence Audits on Low-Income Earners

John Guyton, Kara Leibel, Dayanand Manoli, Ankur Patel, Mark Payne and Brenda Schafer

No 24465, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Each year, the United States Internal Revenue Service identifies taxpayers who may have erroneously claimed Earned Income Tax Credit (EITC) benefits and audits them through a mail correspondence process to verify their claims. This paper exploits the random variation arising from certain aspects of the audit selection process to estimate the impacts of these EITC correspondence audits on taxpayer behaviors. In the years after being audited, taxpayers are less likely to claim EITC benefits, and most of the reduction appears to be in EITC claims that may have been flagged for potential EITC noncompliance. Additionally, qualifying children on audited returns are more likely to be claimed by other taxpayers after the audits. These spillovers indicate that net overpayments may be less than gross overpayments, since ineligible qualifying children on audited returns could potentially be eligible qualifying children on other taxpayers’ returns. Lastly, EITC correspondence audits affect real economic activity, as wage earners experience changes in the likelihood of having wage employment in the years after being audited.

JEL-codes: H24 J20 (search for similar items in EconPapers)
Date: 2018-03
New Economics Papers: this item is included in nep-acc, nep-iue, nep-lma, nep-pbe and nep-pub
Note: LS PE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published as The Effects of EITC Correspondence Audits on Low-Income Earners , John Guyton, Kara Leibel, Day Manoli, Ankur Patel, Mark Payne, Brenda Schafer. in Tax Policy and the Economy, Volume 38 , Moffitt. 2024

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Chapter: The Effects of EITC Correspondence Audits on Low-Income Earners (2023)
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