The CP79 is one of the most punishing IRS notices a low-income taxpayer can receive. The IRS has determined that your Earned Income Tax Credit was improperly claimed due to reckless or intentional disregard of the rules (2-year ban) or fraud (10-year ban). During the ban period, you cannot claim EITC. Period.
What Triggered the Ban
A 2-year ban results from claiming EITC when you knew or should have known you didn't qualify. Common triggers include claiming a qualifying child who didn't live with you, reporting inaccurate income to inflate the credit, and filing with an incorrect filing status to qualify.
A 10-year ban results from fraud, which means intentional deception. Filing a return with fabricated income, fabricated W-2s, or knowingly false qualifying child information can trigger the fraud determination and the decade-long ban.
The Financial Impact
For a family with three qualifying children, EITC can exceed $7,000 per year. A 2-year ban costs $14,000 or more in lost credits. A 10-year ban costs $70,000 or more. For families that depend on the EITC, this is devastating.
After the Ban Period
When the ban period expires, you can claim EITC again, but you must file Form 8862 (Information to Claim Certain Credits After Disallowance) with the first return claiming the credit. Form 8862 proves that you now meet all eligibility requirements. If you don't include Form 8862, the credit will be automatically denied.
Can You Challenge the Ban
If you believe the ban was imposed incorrectly, you can dispute it through the IRS audit reconsideration process or by petitioning Tax Court (if you received a statutory notice of deficiency). However, overturning an EITC ban requires clear evidence that you met all eligibility requirements and that your claim was not reckless or fraudulent.
If you've received a CP79, call us at (813) 229-7100. We can review whether the ban was properly imposed and advise you on next steps.