February 10, 2011
TIGTA: The IRS Pays $12 Billion/Year in Phony EITC Claims -- A 25% Error Rate
The Treasury Inspector General for Tax Administration yesterday released Reduction Targets and Strategies Have Not Been Established to Reduce the Billions of Dollars in Improper Earned Income Tax Credit Payments Each Year (2011-40-023):
The GAO has listed the Earned Income Tax Credit (EITC) Program as having the second highest dollar amount of improper payments of all Federal programs. The IRS has made little improvement in reducing EITC improper payments since 2002 when it was first required to report estimates of these payments to Congress. The IRS continues to report that 23% - 28% of EITC payments are issued improperly each year. In Fiscal Year 2009, this equated to $11 billion to $13 billion in EITC improper payments.
- Accounting Today, IRS Can’t Stop Paying Billions in Bogus EITC Claims
- Associated Press, IRS Not Stopping Billions Improper Tax Credits
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Up the penalties and up the audit rate and require more preparer responsiblity: especially from the EIC RAL mills.
Posted by: George W | Feb 10, 2011 3:19:07 PM
Here's a revolutionary thought: let people keep their own freaking money. Voila! Problem solved.
Posted by: hM | Feb 11, 2011 7:55:37 AM
That's because the EITC is a prime example of using the tax code for the redistribution of wealth. Look for this fraud to increase under the current regime.
Posted by: Christopher | Feb 11, 2011 8:10:49 AM
Obviously, it is time to fire the IG.
Posted by: Hrothgar | Feb 11, 2011 8:20:55 AM
I'm an IRS employee. I examine, in detail, 10's of thousands of tax returns every year. I've been doing this since 2005, and although this is purely anecdotal, I can say with a very comfortable degree of certainty that this percentage increased last year (TY2009), when the EITC was increased in both the number of dependents it covers (from 2 to 3), and in the maximum payout available.
There are considerable compliance costs to policing this as well.
Posted by: "Fred the Fed" :) | Feb 11, 2011 9:35:11 AM
There is no real desire to get rid of the fraud. The Democrats like it because it gives money to the poor. The Republicans like it because all of these EIC dollars flow to business. It has been a long term economic stimulus program.
The fraud will not be stopped.
Nothing will be done.
Posted by: Ray | Feb 11, 2011 12:40:16 PM
EITC is like one of the Jay Leno pieces "What Did You Think Would Happen?" A refundable credit, free money, for simply saying you qualify.
Posted by: MochaLite | Feb 11, 2011 4:33:28 PM
Isn't the larger issue bogus w2s? Usually filed from a prison address? ("What are they going to do? Throw me in prison?").
This is what the 1987 (Recording and Reporting of Your Secrets) Banking Act was supposed to fix. But this news suggests otherwise. What happened?
Posted by: Ari Tai | Feb 11, 2011 7:22:11 PM
"Up the penalties and up the audit rate and require more preparer responsiblity: especially from the EIC RAL mills."
Yes, because the solution to government rules that are already in place and don't work is more government rules just like them, only more so.
Dump EITC. Now.
Posted by: Eric | Feb 12, 2011 2:20:13 AM