More on taxes and children

However confusing the current definitions of "qualifying child" may seem, it used to be worse, with even greater potential for misreporting and confusion. These issues are highlighted in the following two articles:


Title: EITC Noncompliance: The Determinants of the Misreporting of Children

Author: Janet McCubbin
Citation: 53 National Tax Journal 1135-64 (December 2000)
Abstract: Internal Revenue Service data indicate that $4.4 billion in excess EITC was claimed for tax year 1994, largely due to violations of the qualifying child eligibility criteria. I find that the probability of misreporting a child is increasing in the size of the EITC and tax benefit. The estimated effect of the EITC on noncompliance is statistically significant, but modest in size. Reducing the size and scope of the EITC could improve compliance somewhat, but it would also reduce benefits to compliant taxpayers. Efforts to reduce the frequency of unintentional errors and enhance the effectiveness of enforcement activities might bring about greater improvements in EITC error rates, at a lower cost to compliant taxpayers.



Title: Whose Child Is It Anyway? Simplifying the Definition of a Child
Authors: Janet Holtzblatt, Janet McCubbin
Citation: 56 National Tax Journal 701-18 (September 2003)
Abstract: Taxpayers may be eligible for certain tax benefits if they support or live with their children. Each benefit uses a unique definition of child, partly because the provisions address different tax and social policy goals. Other factors, including piecemeal efforts at tax simplification and complicated family structures, contribute to complexity and increase compliance burdens and noncompliance. A consensus is growing that the definition of child can be simplified without sacrificing important policy goals. Proposals to create a uniform definition of child are similar. The differences between the proposals highlight trade-offs that must be made between simplification and other policy objectives.