7 Mistakes You’re Making with the EITC (and How to Fix Them)

NEW HAVEN, CT – JOSE’S TAX SERVICE – MARCH 26, 2026

The Earned Income Tax Credit (EITC) remains one of the most substantial financial boosts available to working families in New Haven. However, because the Internal Revenue Service (IRS) classifies the EITC as a "refundable" credit, it is subject to intense scrutiny and high error rates. Filing an incorrect claim does more than just delay your refund; it can result in a multi-year ban from claiming the credit entirely.

To ensure your filing at Jose's Tax Service is accurate and your refund is maximized, you must avoid these seven common pitfalls. Use the following technical guide to audit your current tax situation and implement the necessary corrections.

1. Claiming a Child Who Fails the Four-Part Qualifying Test!

The most frequent error identified by the IRS involves the "qualifying child" criteria. A child does not automatically qualify you for the EITC simply because you provide financial support. To be eligible, the child must meet four specific requirements:

• Relationship: The child must be your son, daughter, stepchild, foster child, brother, sister, half-brother, half-sister, stepbrother, stepsister, or a descendant of any of them.
• Age: The child must be under age 19 at the end of the tax year and younger than you (or your spouse if filing jointly), OR under age 24 if a full-time student, OR any age if permanently and totally disabled.
• Residency: The child must have lived with you in the United States for more than half of the tax year. For New Haven residents, this means maintaining a primary residence within the country for at least 183 days.
• Joint Return: The child cannot have filed a joint return for the year (unless it was only to claim a refund of withheld income tax or estimated tax paid).

The Fix: Use IRS Publication 596 to verify every child’s status. Retain records such as school transcripts, medical records, or daycare receipts that prove the child lived at your address for the majority of 2025.

2. Multiple Taxpayers Claiming the Same Qualifying Child!

In many households, especially multi-generational homes in New Haven, more than one person may technically meet the criteria to claim a child. However, the law dictates that only one filer can claim the EITC for a specific qualifying child. If two people claim the same child, the IRS applies "tie-breaker rules."

The priority usually goes to the parent. If both are parents, it goes to the parent with whom the child lived longest. If the time is equal, it goes to the parent with the higher Adjusted Gross Income (AGI).

The Fix: Coordinate with other household members or former partners before filing. If you are a non-parent claiming a child, ensure the parents are not also claiming that child. For the 2025 filing season, ensure that if you are the rightful claimant, you have secured an Identity Protection Personal Identification Number (IP PIN) if previously subject to identity disputes.

Review our tax planning resources to understand how household income affects these tie-breaker scenarios.

3. Social Security Number and Name Mismatches!

The IRS computers verify every name and Social Security Number (SSN) against Social Security Administration (SSA) records. If a name is misspelled, or if a last name has changed due to marriage or divorce but has not been updated with the SSA, the EITC claim will be automatically flagged and the refund delayed.

The Fix: Compare your tax return directly against the physical Social Security cards for yourself, your spouse, and every dependent. Enter the names exactly as they appear on the cards. Do not use nicknames or shortened versions of names. If a name has changed, you must file Form SS-5 with the Social Security Administration before submitting your tax return.

4. Filing with the Incorrect Filing Status!

Filing status determines your standard deduction and your eligibility for various credits. A common mistake is filing as "Single" or "Head of Household" when you are legally married.

• If you are married, you generally must file as Married Filing Jointly to claim the EITC.
• You may only file as Head of Household if you are "considered unmarried" by the IRS, which requires living apart from your spouse for the last six months of the year and providing more than half the cost of keeping up a home for a qualifying person.

The Fix: Consult the IRS EITC Assistant or speak with a pro at Jose's Tax Service to determine your legal filing status. Filing as "Single" while married to receive a larger credit is considered fraudulent and can lead to a 10-year ban on future EITC claims.

5. Over-reporting or Under-reporting Income and Expenses!

The EITC is calculated based on "Earned Income." This includes wages, tips, and net earnings from self-employment.

• Under-reporting: Failing to report 1099-NEC income or "side hustle" cash can result in an audit.
• Over-reporting: Some filers inflate their income to reach the "sweet spot" of the EITC phase-in to maximize the credit. This is illegal.

The Fix: Gather all W-2s, 1099-MISC, and 1099-NEC forms. If you are self-employed, you must maintain a daily log of income and expenses. Report every dollar earned and deduct only allowable business expenses. Use our small business learning center to help track these figures accurately.

6. Using an SSN Issued After the Tax Return Due Date!

To claim the EITC, you, your spouse (if filing jointly), and any qualifying child must have a valid SSN issued on or before the due date of the return (including extensions). If you receive an SSN in May for a return that was due in April, you cannot retroactively claim the EITC for that tax year.

The Fix: Check the "Date of Issue" on any newly received Social Security cards. If the date is past the filing deadline, do not attempt to claim the credit for the current year. Wait until the following tax year to apply for the credit using that SSN. For assistance with timing and extensions, visit our contact page.

7. Exceeding the Adjusted Gross Income (AGI) Limits!

The EITC is a means-tested credit. As your income increases, the credit "phases out" until it reaches zero. For the 2025 tax year (filed in 2026), the limits are strict. If your AGI or earned income exceeds the threshold for your filing status and number of children, you are ineligible. Additionally, if your investment income (interest, dividends, stock sales) exceeds $11,000, you are disqualified regardless of your earned income.

The Fix: Calculate your AGI precisely by totaling all income sources and subtracting "adjustments to income" found on Schedule 1 of Form 1040. Ensure you are not overlooking interest income from savings accounts or dividends from apps like Robinhood or E-Trade, as these contribute to the investment income limit.

The Consequences of EITC Errors

The IRS takes EITC compliance seriously. If an error is discovered:

1. Refund Delays: The IRS will hold the portion of your refund related to the EITC and the Additional Child Tax Credit (ACTC) for further investigation.
2. Form 8862: You may be required to file Form 8862, Information To Claim Certain Credits After Disallowance, to prove your eligibility for future years.
3. Bans: If the IRS determines the error was due to "reckless or intentional disregard" of the rules, you are banned for 2 years. If the error is due to fraud, the ban is 10 years.

Actionable Steps for New Haven Taxpayers

To protect your refund and ensure your family receives the full benefit of the EITC, follow these commands:

• File your return only after you have received every W-2 and 1099 form for the year.
• Enter all data exactly as it appears on official government documents.
• Double-check the residency of any child you claim; keep a copy of their school registration on file.
• Use a professional tax preparer who understands the specific needs of New Haven families and local tax updates.

If you are unsure about your eligibility or have received a notice from the IRS regarding a previous EITC claim, schedule your tax appointment with ease at our New Haven office. We specialize in tax preparation services that prioritize accuracy and compliance.

Reminder: The deadline to file your 2025 tax return is April 15, 2026. Ensure all corrections are made before this date to avoid late-filing penalties.

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Tags: EITC, tax refund, New Haven tax prep, IRS mistakes, Form 1040, Schedule EIC, tax credits 2026, 2026 tax planning, tax planning tips, 2026 tax season, IRS tax planning, earned income tax credit, New Haven families, IRS audit protection