WASHINGTON — The federal government loses billions of dollars annually when low-income taxpayers claim the earned income tax credit but aren't eligible.

At the same time, billions that could help needy low-income families is left unclaimed.

One solution: free community tax preparation clinics where trained volunteers use IRS computer software to help taxpayers pick their way through the sometimes confusing EITC eligibility rules.

The earned income tax credit is often referred to as the government's largest program for the poor, rewarding many of the working poor with up to several thousand dollars to help lift them above the poverty line.

But in the late 1990s, one government study estimated the error rate on tax returns claiming the credit was as high as 28 percent.

DC Cash, a free tax service staffed by volunteers in the nation's capital, registered an error rate of only 2 percent last year.

"We definitely are trying to support these programs," said Internal Revenue Service Commissioner Mark Everson, who has toured several of the free tax clinics with members of Congress in recent weeks, including one operated by DC Cash.

"If you look at these volunteer programs, we have some 12,000 sites around the country. The volunteer-prepared returns thus far in the filing season are up 12 percent in contrast to a year ago," he said.

Everson said the IRS is requesting a $5 million increase in funding for the Volunteer Income Tax Assistance program in 2008.

The advantage of the volunteer clinics is that they are in libraries, schools, community centers and churches in convenient locations. Their hours of operation, however, are often limited, and taxpayers must have incomes below $39,000.

And while some groups such as DC Cash can boast of a high accuracy rate, others cannot.

In 2004, the Treasury Inspector General for Tax Administration issued a report skewering these VITA clinics for making mistakes, saying none of the returns prepared for its undercover field investigators was correct.

Critics pointed out, however, that the study used unusual cases not ordinarily handled by the volunteers.

More recently, the accuracy of the volunteer clinics has improved significantly, according to Bonnie Heald, spokeswoman for the Treasury Inspector General for Tax Administration.

In large part, that's because the IRS has implemented numerous quality controls.

All volunteers are required to get training and pass a proficiency test. The IRS also has developed an intake sheet listing pertinent questions for volunteers to ask.

At the VITA clinic at Northcentral Technical College in Wausau, Wis., volunteers are supervised by instructor Ellen Kemnitz, a certified public accountant who recruits students from her tax preparation class.

"I've been doing taxes for 20 years," said Kemnitz, who will review all 200 of the tax returns the clinic will complete this year.

Only 1 (percent) or 2 percent of the those tax returns are rejected by the IRS as inaccurate, she said. "If people bring in information that is inaccurate, we can't do anything about that."

Erika Schafer, a spokeswoman for the National Community Tax Coalition, a Chicago-based umbrella organization representing the free tax clinics, said they also offer an alternative to commercial tax preparation chains that push refund anticipation loans.