Interesting.  From a taxpayer's viewpoint, this is a perfectly valid method to "game" the EIC system.

But from the so-called "employer" viewpoint, they better be doing things properly.  They need to be keeping the W-4 and I-9 for hiring a person.  They need to check if State Unemployment and/or Worker's Compensation is applicable.  They need to check other state laws, such as posting "workplace" posters or similar things.

From a tax preparers' viewpoint, they can certainly suggest such things, and take the credit if things are EXTREMELY WELL documented.

I don't know how active they are at it, but the IRS does analyze tax preparers that do a large number of EIC returns, and can even audit the preparer about it (as we saw a few years ago from someone on this forum).