IRS Ramps Up Dependent Verification Requests in Audit Push
The Internal Revenue Service is increasing enforcement of dependent claims, issuing more notices that require taxpayers to verify eligibility for refundable credits. New federal data shows a sharp rise in correspondence audits tied to Earned Income Tax Credit and Child Tax Credit filings, contributing to refund delays for affected households.
The agency is relying heavily on correspondence audits to review returns that include dependent-related credits. According to the latest data, these audits now account for the majority of all examinations, with hundreds of thousands conducted via mailed notices rather than in-person reviews.
This approach allows officials to quickly flag potential errors, particularly when multiple taxpayers claim the same dependent or when reported information does not match existing records. As a result, more taxpayers are receiving audit letters focused on dependent verification and credit eligibility.
Ongoing concerns about improper payments are driving the surge in IRS-dependent verification requests. Federal estimates show that the Earned Income Tax Credit continues to have a high error rate, while the Additional Child Tax Credit results in billions of dollars in incorrect payments each year.
Most of these issues stem from confusion around qualifying child rules rather than intentional misuse. Determining eligibility requires meeting strict criteria involving residency, relationship, age, and support, which can be difficult in households with shared custody or changing living arrangements.
Taxpayers typically receive a CP75 or CP75A notice to initiate a correspondence audit when we identify a potential issue. These letters request documents to verify the taxpayer’s right to claim a dependent and receive related credits.
Another common notice, CP87A, is issued when two tax returns list the same Social Security number for a dependent. In these cases, both filers are asked to review their claims and amend returns if necessary or prepare to provide supporting documentation.
Taxpayers who receive a CP75 notice often experience delays in their federal tax refund. The refund is placed on hold while documents are reviewed, which can extend processing times by several weeks or longer.
If the taxpayer does not respond or fails to meet documentation requirements, the agency may deny the Earned Income Tax Credit or Child Tax Credit. This can reduce or eliminate the expected refund and may lead to additional tax owed.
To resolve a dependent audit letter, taxpayers must provide records that confirm the child lived with them and meets eligibility rules. Acceptable documents often include school records, medical statements, or official correspondence showing the child’s name and address during the tax year.
Officials generally look for multiple documents covering part of the year. These records play a crucial role in establishing residency, a common reason for denying dependent claims during audits.
Tax professionals recommend keeping records throughout the year to avoid problems if an audit notice arrives. Reviewing guidance on qualifying child rules before filing can also reduce the risk of errors that trigger verification requests.
Responding promptly to correspondence is critical. Missing deadlines can lead to automatic credit denial and make it more difficult to challenge the outcome later through the appeals process.
The increase in IRS dependent verification requests reflects a broader compliance effort to ensure refundable tax credits are issued correctly. For taxpayers, maintaining accurate records and understanding eligibility rules remains the best defense against audit delays and denied claims.
By William Mc Lee, Editor-in-Chief & Tax Expert—Get Tax Relief Now
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