The earned income tax credit (EITC) is designed to assist low- to moderate-income workers by reducing their tax liability and, in some cases, increasing their refunds.
However, if your EITC claim was rejected on your 2025 tax return, it’s crucial to know why and take appropriate steps to resolve the issue. Ignoring it could lead to penalties or even disqualification from claiming the credit in the future.
Rejection
If the IRS denies or reduces your EITC claim, the rejection may be due to incorrect information, missing details, or ineligibility. The IRS may also reject other related tax credits, including:
- Child tax credit (CTC)
- Additional child tax credit (ACTC)
- Credit for other dependents (ODC)
If your claim is denied, you may need to:
- Repay any disallowed amount, including interest.
- File Form 8862 to claim the credit again in the future.
- If the IRS finds errors or fraud, you may be banned from claiming the EITC for 2 to 10 years.
Form 8862
When the IRS rejects or reduces your EITC claim, you may need to file Form 8862, “Information to Claim Certain Credits After Disallowance,” with your next tax return. This form reestablishes eligibility after a previous disallowance.
However, you do not need to file Form 8862 if:
- You have already submitted it in a prior year, and your credits were approved without further issues.
- Your credit was reduced due to mathematical or administrative errors, rather than eligibility concerns.
Mistakes
Errors on your tax return can lead to serious consequences. If the IRS finds that you recklessly submitted an incorrect claim, you may be banned for two years from claiming the EITC. If the IRS determines fraud, you could face a 10-year ban.
Additionally, you may be penalized with a 20% fine if your incorrect claim exceeds the allowed amount. This is why double-checking your return before submission is essential.
Qualification
The EITC is available to low- and moderate-income workers who meet specific income and residency requirements. Your credit amount depends on:
- Your earned income
- The number of qualifying dependents
- Your filing status
Certain groups, including military personnel and clergy, should review EITC special rules, as claiming the credit may affect other government benefits.
IRS Notices
If your EITC is rejected, the IRS will send a notice explaining the reason. One of the most common notices is CP74, which outlines necessary steps for resolving the issue.
Additionally, if you are expecting a refund, keep in mind that EITC-related refunds are delayed until mid-February due to federal law requiring additional IRS review.
By staying informed and following the correct procedures, you can resolve your EITC rejection and avoid future tax issues. If needed, consult a tax professional or visit the IRS website for further guidance.
FAQs
Why was my EITC rejected?
Your EITC may have been rejected due to income limits, missing information, or errors.
How do I fix a denied EITC claim?
You may need to file Form 8862 and correct any errors on your tax return.
Can I be banned from claiming EITC?
Yes, if the IRS finds reckless errors (2 years) or fraud (10 years).
Will my refund be delayed?
Yes, EITC-related refunds are typically delayed until mid-February.
Who qualifies for EITC?
Low- to moderate-income workers with or without dependents may qualify.
