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Form 8862 is of Questionable Value

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Form 8862 Is of
Taxpayers begin the recertification process by filing Form 8862 with their
tax return. In a 1999 report, we raised concerns about the usefulness of
Questionable Value
Form 8862 and its potential for misleading or confusing taxpayers.11 We
recommended that IRS stop using the form if it is not needed for
recertification purposes. IRS did not eliminate the form because it said it
relies on the form to "identify the type of action to be taken for taxpayers
required to recertify." In that regard, IRS does use Form 8862 to decide
whether or not to initiate the recertification process. If a taxpayer files a
return claiming the EIC and does not attach a Form 8862, IRS is authorized
to disallow the credit without going through the recertification process
and inform the taxpayer that the disallowance is due to the failure to
attach Form 8862.12 If a taxpayer submits Form 8862, according to IRS's
recertification guidelines, the taxpayer's return is to be forwarded for
audit if the taxpayer is still claiming the previously disallowed EIC child or
is claiming a new EIC child. However, Form 8862 does not assist in this
determination, because the names and Social Security numbers of the
taxpayer's children that IRS needs to match against the prior year's tax
return do not appear on the form.
On the basis of our telephone survey of IRS examiners, we estimate that 86
percent of all examiners working in the recertification program do not find
Form 8862 useful. A few examiners pointed out that Form 8862 is
generally not part of the case file they receive when they begin
recertification. Even when Form 8862 is in the case file, some examiners
said that they do not use it because there are no supporting documents
submitted with the form. Although the great majority of examiners do not
find Form 8862 useful, IRS estimates that taxpayers need an average of 2
hours and 44 minutes to complete and file the form. In that regard, of the
10 LITC representatives we talked with, 7 said that Form 8862 is not easy
for most of their clients to understand.
Thirteen of the examiners we surveyed did say that Form 8862 had some
value. Some pointed out that the form gave them some initial information
about the taxpayer before seeking additional information. Others said that
the form would alert taxpayers to the kind of documentation they should
expect to provide during the recertification process. However, taxpayers
11
U.S. General Accounting Office, Tax Administration: IRS' 1999 Tax Filing Season,
GAO/GGD-00-37 (Washington, D.C.: Dec. 15, 1999).
12
If a taxpayer, after being informed of a disallowance for failure to submit Form 8862,
sends IRS a Form 8862, IRS is to begin the recertification process.
Page 9
GAO-02-449 Earned Income Credit

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