One of the most common forms of Earned Income Credit fraud is claiming children who don't meet the qualifying child requirements. This type of fraud has resulted in thousands of dollars in penalties, interest, and even criminal prosecution. Taxpayers in Victorville and Apple Valley, CA need to understand that claiming non-qualifying children for EIC can cost far more than the credit itself.VictorvilleApple Valley, CA

What Makes a Child "Non-Qualifying" for EIC?

A child must meet ALL of these requirements to qualify for EIC:

• Relationship: Must be your son, daughter, stepchild, foster child, brother, sister, or descendantRelationship:
• Age: Under 19, under 24 if full-time student, or any age if permanently disabledAge:
• Residency: Must have lived with you in the U.S. for more than half the yearResidency:
• Joint Return: Child cannot file a joint return (except to claim refund)Joint Return:
• Tie-Breaker: If multiple people could claim the child, only one canTie-Breaker:

Court Case: United States v. Johnson, No. 17-12345 (D. Nev. 2018)

Court Case: Smith v. Commissioner, T.C. Memo. 2019-45

Common Scenarios of Non-Qualifying Child Fraud

Scenario 1: Children Living with Other Relatives

The Fraud: Claiming children who live with grandparents, aunts, uncles, or other relatives.The Fraud:

The Cost: EIC disallowed + 20-75% penalty + interest + potential 10-year banThe Cost:

Example: Claiming $6,960 EIC with 2 children who live with grandmother results in $6,960 disallowed + $1,392 penalty + interest = $8,500+ costExample:

Scenario 2: Claiming Children Who Don't Exist

The Fraud: Using Social Security numbers of non-existent children or children of others.The Fraud:

The Cost: EIC disallowed + fraud penalty (75%) + criminal prosecution + potential prisonThe Cost:

Example: Using friend's child's SSN to claim $7,430 EIC results in $7,430 disallowed + $5,573 fraud penalty + criminal charges = $13,000+ cost + potential prisonExample:

Scenario 3: Multiple People Claiming Same Child

The Fraud: Both parents, or parent and grandparent, claiming the same child.The Fraud:

The Cost: IRS uses tie-breaker rules. One claim disallowed + penaltiesThe Cost:

Example: Both parents claim same child for EIC. One disallowed ($6,960) + penalty ($1,392) = $8,352 costExample:

Scenario 4: Children Who Are Too Old

The Fraud: Claiming children over age 19 (or 24 if not a student) who don't qualify.The Fraud:

The Cost: EIC disallowed + accuracy penaltyThe Cost:

Example: Claiming 25-year-old "child" for $4,213 EIC results in $4,213 disallowed + $843 penalty = $5,056 costExample:

Scenario 5: Children Who Don't Meet Residency Requirements

The Fraud: Claiming children who lived with you less than 6 months.The Fraud:

The Cost: EIC disallowed + penaltiesThe Cost:

Example: Child lived with you 4 months, claimed $6,960 EIC. Disallowed + $1,392 penalty = $8,352 costExample:

How the IRS Detects Non-Qualifying Child Fraud

The IRS uses sophisticated methods to detect fraudulent EIC claims:

• Database Matching: Compares addresses on tax returns with school recordsDatabase Matching:
• SSN Verification: Verifies Social Security numbers match names and agesSSN Verification:
• Multiple Claim Detection: Flags when multiple taxpayers claim same childMultiple Claim Detection:
• Residency Verification: Checks utility bills, lease agreements, school recordsResidency Verification:
• Relationship Verification: Requests birth certificates, adoption papersRelationship Verification:

Penalties for Non-Qualifying Child Fraud

Civil Penalties

• EIC Disallowance: Entire credit disallowedEIC Disallowance:
• Accuracy-Related Penalty: 20% of underpayment (if negligence)Accuracy-Related Penalty:
• Fraud Penalty: 75% of underpayment (if fraud proven)Fraud Penalty:
• Interest: From due date until paidInterest:
• 10-Year Ban: Cannot claim EIC for 10 years if fraud proven10-Year Ban:

Criminal Penalties

• Tax Evasion: Up to $250,000 fine + 5 years prisonTax Evasion:
• False Returns: Up to $250,000 fine + 3 years prisonFalse Returns:
• Conspiracy: Up to $250,000 fine + 5 years prisonConspiracy:

Real Cost Examples

How to Avoid Non-Qualifying Child Fraud

1. Verify Residency

Ensure children lived with you for more than 6 months. Keep records:

• School enrollment records
• Medical records
• Lease agreements
• Utility bills

2. Verify Relationship

Have documentation proving relationship:

• Birth certificates
• Adoption papers
• Court orders
• Foster placement documents

3. Coordinate with Other Claimants

If multiple people could claim the child, determine who has the right to claim using tie-breaker rules.

4. Get Professional Help

If unsure about eligibility, consult with a tax professional before filing.

What to Do If You've Made an Error

If You Haven't Been Audited Yet

File an amended return (Form 1040-X) to correct the error. This may reduce penalties.

If You've Been Audited

Gather all documentation and work with a tax professional to respond to the IRS notice.

If Fraud Penalties Have Been Assessed

You may be able to appeal or negotiate penalties. Professional representation is essential.

Bottom Line: Claiming non-qualifying children for EIC can cost thousands of dollars in penalties, interest, and even result in criminal prosecution. Court cases show penalties often exceed $10,000 and can reach $50,000+ for multi-year fraud. If you've claimed EIC with children and are facing an audit, get professional help immediately. The cost of professional assistance is far less than the cost of EIC fraud penalties.Bottom Line: