The Earned Income Tax Credit and Reported Self-Employment Income
The EITC subsidizes earnings from both wages and self–employment. This paper uses tax return data to investigate how the EITC affects the reporting of self–employment income to the IRS. A difference–in–difference strategy is used, considering three EITC expansions and comparing filers with and without children. Expansions are predicted to increase the reporting of self–employment income in the phase–in region and to reduce it in the phase–out region. Among the lowest–income filers, the 1994 expansion is associated with a significant increase in the probability of reporting positive self–employment income, equal to 3.2 percentage points for unmarried filers and 4.1 percentage points for married filers.
Volume (Year): 62 (2009)
Issue (Month): 2 (June)
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