TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Thursday, October 28, 2010

TIGTA: IRS Paid $111m in Erroneous Recovery Act Tax Refunds to 126k Taxpayers

TIGTA The Treasury Inspector General for Tax Administration today released Verifying Eligibility for Certain New Tax Benefits Was a Challenge for the 2010 Filing Season (2010-41-128):

While the IRS received about 132 million individual income tax returns and issued approximately 101 million refunds totaling $291.7 billion through May 28, 2010, those returns contained nearly 23.7 million errors, an increase of 7.1% over the same period last year. TIGTA identified inadequate controls and incomplete and inaccurate programming resulting in 125,762 individuals receiving nearly $111.4 million in erroneous Recovery Act-related tax benefits, including:

  • 10,581 individuals claiming $65.6 million in erroneous First-Time Homebuyer Credits (IRS prevented 2,363 of them from receiving some $11.3 million in credits);
  • 109,665 individuals erroneously received $29.7 million in Making Work Pay and Government Retiree Credits;
  • 5,345 individuals erroneously claimed $15.6 million in plug-in electric vehicle credits; and
  • 171 individuals claimed $453,220 in erroneous non-business energy property credits.

TIGTA also identified 2,933 individuals with more than $95.8 million in Qualified Motor Vehicle Tax deductions on individual income tax returns (Form 1040, Schedule A) that exceeded the dollar amount the IRS uses to identify a potentially erroneous claim. The IRS has not developed a process to identify these potentially erroneous claims on Schedule A.

“During the 2010 Filing Season, the IRS timely processed individual income tax returns and issued refunds on schedule,” said J. Russell George, the Treasury Inspector General for Tax Administration. “However, while the IRS did a good job overall, improvements are needed to prevent erroneous claims for credits and deductions.”

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One of the problems with the Making Work Pay credit was that seniors received the payments early in 2009. By the time tax time rolled around, many didn't remember getting the payment, and did not have the record that they were eligible. You certainly could assume that - if you were preparing the return - they DID get the credit, but that leaves a fair amount of people who do their own taxes, and either don't remember or don't know that that's what they got (one senior told me "I got some kind of money, but damned if I know what it was"). Of course, there's the contingent that will outright lie, but I'm not including them - just the confused/forgetful ones.

Posted by: TaxHacker | Oct 28, 2010 9:55:37 PM