Paul L. Caron

Friday, October 21, 2011

TIGTA: IRS Allowed $3.2 Billion in Erroneous Education Credits in 5-Month Period

TIGTA The Treasury Inspector General for Tax Administration yesterday released Billions of Dollars in Education Credits Appear to Be Erroneous (2011-41-083):

[F]rom January 1 through May 28, 2010. TIGTA identified 2.1 million taxpayers receiving $3.2 billion in education credits that appear to be erroneous, and at least 1.1 million (52%) had tax returns prepared by a paid tax return preparer.

  • 1.7 million taxpayers received $2.6 billion in erroneous education credits.
  • 370,924 individuals were claimed as students but were not eligible for education credits because they did not attend the required amouint of time and/or were post graduate students. This resulted in an estimated $550 million in errorneous education credits.
  • 63,713 taxpayers errorneously received $884 million in education credits for students claimed as a dependent or spouse on another taxpayer's tax return.
  • 250 prisoners erroneously received $255,879 in education credits.

Press and blogosphere coverage:

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MG, I find them both depressing and disgusting. The purpose of these credits is vote-getting and income redistribution. Their economic outcome is the same as all government-subsidized efforts: vastly increased costs. Their moral cost is the same as all government-subsidized efforts: reduced personal responsibility and increased "gimmee-ism".

Posted by: MochaLite | Oct 21, 2011 4:27:04 PM

The tax program asks me if a student has received previous education credits and tuition deductions, but the taxpayer often doesn't know or remember, so we do the best that we can. It would be nice if the IRS had a search feature for these previous credits like it does for Economic Recovery Payments.

Posted by: Woody | Oct 21, 2011 12:44:45 PM

Does anyone else out there find these TIGTA reports depressing?

With all the technological resources available, why are so many erroneous payments being made? Where's the quality control BEFORE payment/allowance?

Posted by: ColoComment | Oct 21, 2011 9:05:05 AM

Headline understates the quality and quantity of another fiscal scandal:

Almost 60% of the "errors" where payments in situations where there was NO ATTENDANCE OF AN EDUCATIONAL INSTITUTION. This is much more like...fraud.

The amounts relate to only one year out of a four year program starting in 2009. Thus the running cost is certain to be higher by now, and the likely ballpark cost to program expiry, a significant multiple of that figure.

Posted by: MG | Oct 21, 2011 8:59:13 AM