The ongoing debate among Senate Republicans regarding President Donald Trump's significant legislation has highlighted an often-overlooked provision that could impact low-income tax credits. Specifically, a measure from a House-approved package may complicate how individuals can claim the Earned Income Tax Credit (EITC), which is critical for many low-wage earners.
If approved in its current form, the legislation known as the “One Big Beautiful Bill Act” would mandate a precertification process for each qualifying child claimed by taxpayers who seek to benefit from the EITC. This change would take effect in 2028 and would mark a significant shift from the existing process, where filers claim the tax credit directly on their returns without prior approval.
The goal of this proposed precertification is to minimize duplicative claims and curb erroneous submissions, according to the language within the bill. However, many policy analysts express concerns that these new requirements would place additional burdens on eligible taxpayers. This could result in individuals forgoing the EITC entirely, especially amidst ongoing IRS cutbacks and potential delays in tax refunds.
Janet Holtzblatt, a senior fellow at the Urban-Brookings Tax Policy Center, has voiced criticism regarding how the IRS would manage the influx of documentation necessitated by this precertification process. "You're going to flood the IRS with all these EITC documents," Holtzblatt stated, questioning the IRS's capacity to efficiently process this information.
The idea of requiring precertification for EITC claims is not new. It has been previously considered and ultimately dismissed due to several complications. Greg Leiserson, a senior fellow at New York University's Tax Law Center, highlighted that studies dating back to the George W. Bush administration showed that a similar precertification approach led to reduced EITC claims among eligible filers. The studies indicated that precertification provided a lower return on investment compared to current EITC enforcement mechanisms such as audits.
A defining feature of the Earned Income Tax Credit is that it is a refundable tax credit. This means that even if a taxpayer has no tax liability, they can still receive a refund if they qualify for the credit. This aspect is particularly advantageous for lower-income individuals who might not owe federal taxes.
To qualify for the EITC, filers must have "earned income," which refers to wages or salaries from employment. Eligibility for the credit is dependent on several factors, including the number of qualifying children and adjusted gross income (AGI) thresholds. For the tax year 2025, families can claim up to $8,046, with maximum eligibility based on AGI limits that vary for single and married filers.
As of December 2024, approximately 23 million workers received the EITC for the 2022 tax year, but an estimated one in five eligible taxpayers do not claim this beneficial tax break, according to IRS data.
Last week, nine Democratic Senators raised alarms about the potential EITC changes in a letter addressed to Senate Majority Leader John Thune and House Speaker Mike Johnson. The Senators argued that implementing these updates would complicate existing issues, ultimately making it more challenging for eligible individuals to claim their credits.
It's also noteworthy that while higher-income earners face the likelihood of audits, EITC claimants experience a much higher audit rate—5.5 times greater than other filers. This discrepancy is partly attributable to improper payment rates.
The proposed changes to the EITC and other aspects of the House bill still require Senate approval, and the exact modifications that could occur remain uncertain. However, experts indicate that advances in this bill could be streamlined within the reconciliation process, where Senate Republicans would only need a simple majority for passage.
As discussions continue in both the House and Senate, individuals concerned about their EITC eligibility and the implications of these changes should stay informed on the developments surrounding this legislation.
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