I've been poking around on-line to find out if anybody else is talking about those audit letters being sent out to low-income families who file for EITC (earned income tax credit) or the Child Tax Credit.

Here's the most complete article I've found from the American Prospect.

I found this on the tax-coalition.org site:

IRS Refund Freezes [posted 2/6/06]

...It seems the IRS has developed a back-door mechanism to audit this many EITC taxpayers – thus thwarting the intent of Congress to prevent such targeting.

Seventy-five percent of the estimated 1.6 million Americans who had their refunds secretly [frozen] over the last five years (as reported in January by the National Taxpayer Advocate) were EITC taxpayers; the median income of all those targeted was $13,330 and their median refund was $3,519. The hundreds of thousands of secret refund of EITC freezes annually are in addition to nearly half a million audits of EITC taxpayers by the Wages &Investment examination unit, 300,000 “automated underreporting of income” audits, and 60,000 special EITC audit “tests”. Thus the number of annual EITC audits is likely over 1,000,000 per year.

The Center for Economic Progress is strongly opposing the refund freeze program, with the following talking points:

• The program is abusive towards taxpayers and should be immediately suspended.
• This constitutes something akin to racial profiling, what we’d call income profiling.
• The program as it is should be ended and any refund freeze function should be moved into Examinations. Criminal Investigation should not be freezing refunds.

>>>>>>>>>>

Apparently, the secret freezing has stopped, though I know one couple who had their refund check frozen with an IRS letter informing them they would be penalized if they cashed that check.

I also found this story on John Kerry's site:

In 2004, the IRS conducted 48 percent of its audits on EITC taxpayers, who make up only 17 percent of all tax payers. Kerry said, “We need to right the imbalance of these audits, focusing on the fraudsters who do the most damage and only pry the tax gap wider..."

The audits I referred to in my recent blog post were Massachusetts audits and I can't find any specific articles on this issue.

This Excel spreadsheet is also interesting because it shows state by state how many people claim the credit, how many had their checks frozen, and the government savings involved.