GAO -- Get your Earned Income Tax Credit earlier
In a reported titled Advanced Earned Income Tax Credit: Low Use and Small Dollars Impede IRS's Efforts to Reduce High Noncompliance the GAO looks at the amount and quality of use of the Advance Earned Income Tax Credit.
The traditional EITC was introduced in the 1970s to counterbalance Social Security taxes and make working a more feasible option for lower-income individuals. People who qualify may end up receiving a credit at the end of the year that actually exceeds their income tax on the year. Naturally, however, having to pay Social Security taxes up front all year can be a hard hit for the working poor. With that in mind, in 1979 Congress introduced the Advance EITC (AEITC), which lets you file a form with your employer and receive regular disbursements from your EITC throughout the year, simply added to your paycheck.
Although this sounds like a great option, only around 3% of eligible individuals used the AEITC option in the early 2000s. GAO was called on to figure out why, and to check on compliance issues (that is, are people receiving the AEITC who shouldn't?).

As can be seen in the summary charts above, few take the option, and most fail to comply with one or more of the program rules.
On the topic of getting people to use the AEITC in the first place, GAO concludes that IRS has tried to promote the idea with minimal effect. There's some suspicion that people prefer to receive a lump sum payment at the end of the year (the classic EITC) rather than being paid incrementally. Purely in terms of being able to earn interest on your money (or avoiding interest on debt by dint of being able to pay it off early) this is a poor decision. Given the option, the AEITC is the better choice.
On compliance issues, GAO points to a number of problems with compliance with AEITC rules. Major problems include:
- Failure of a would-be AEITC recipient to have a valid Social Security Number (20% of the noncompliance cases, which seems quite high)
- Failure to file a tax return (40% of noncompliance cases)
- Failure to report receiving AEITC (about 70% of cases)
Note that some cases involve noncompliance in more than one area, so these do not add up to 100%.
In other words, a number of people who do receive AEITC money receive it without fulfilling some of the basic requirements that help ensure that, for example, someone does not receive both AEITC money and classic EITC money. Suggestions to help resolve these issues include sending "soft notices" to recipients to remind them to fulfill the requirements, requiring employers to verify SSNs, and making a database of W-5 forms sent in (that's the form your employer sends to the IRS when signing you up for AEITC). All of these options are, naturally, limited by the available resources of the IRS. Should they be ineffective, GAO recommends that IRS refer the issue to Congress, who can then determine whether or not AEITC should be continued.
With all that said, however, the true take-home message for the many low-income workers out there is that 97% of you aren't taking advantage of the AEITC. Click here to find out if you're eligible. If you are, it seems like an awfully good idea to take the AEITC and get your money now instead of later.