Section 1 Short title
This Act may be cited as the “Improper Tax Payments Reduction Act of 2017”.
Improper Tax Payments Reduction Act of 2017
A BILL
To amend the Internal Revenue Code of 1986 to prevent the fraudulent overreporting of income with respect to the earned income tax credit and the additional child tax credit.
Sec. 2 Procedures to reduce improper claims of earned income credit
Clarification regarding determination of self-Employment income which is treated as earned income— Section 32(c)(2)(B) of such Code is amended by striking “and” at the end of clause (v), by striking the period at the end of clause (vi) and inserting “, and”, and by adding at the end the following new clause:
“(vii) in determining the taxpayer’s net earnings from self-employment under subparagraph (A)(ii) there shall not fail to be taken into account any deduction which is allowable to the taxpayer under this subtitle.”
Required quarterly reporting of wages of employees— Section 6011 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsection:
“(i) Employer reporting of wages—Every person required to deduct and withhold from an employee a tax under section 3101 or 3402 shall include on each return or statement submitted with respect to such taxes, the name and address of such employee and the amount of wages for such employee on which such tax was withheld.”
Effective date— The amendments made by this section shall apply to taxable years ending after the date of the enactment of this Act.
Sec. 3 Certain income disallowed for purposes of the earned income tax credit
Substantiation requirement— Section 32 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsection:
“(n) Inconsistent income reporting—If the earned income of a taxpayer claimed on a return for purposes of this section is not substantiated by statements or returns under section 6051, 6052, 6041(a), or 6050(w) with respect to such taxpayer, the Secretary may require such taxpayer to provide books and records to substantiate such income, including for the purpose of preventing fraud.”
Exclusion of unsubstantiated amount from earned income— Paragraph (2) of section 32(c) of the Internal Revenue Code of 1986 is amended by adding at the end the following new subparagraph:
“(C) Exclusion—In the case of a taxpayer with respect to which there is an inconsistency described in subsection (n) who fails to substantiate such inconsistency to the satisfaction of the Secretary, the term “earned income” shall not include amounts to the extent of such inconsistency.”
Effective date— The amendments made by this section shall apply to taxable years ending after the date of the enactment of this Act.