Paul L. Caron

Wednesday, December 10, 2014

TIGTA: IRS Has 25-30% Error Rate In Refundable Child Tax Credits, Mistakenly Pays $6-7 Billion

TIGTA The Treasury Inspector General for Tax Administration yesterday released Existing Compliance Processes Will Not Reduce the Billions of Dollars in Improper Earned Income Tax Credit and Additional Child Tax Credit Payments (2014-40-093):

The Earned Income Tax Credit (EITC) and Additional Child Tax Credit (ACTC) are refundable credits designed to help low-income individuals reduce their tax burden. The IRS estimated that it paid $63 billion in refundable EITCs and $26.6 billion in refundable ACTCs for Tax Year 2012. The IRS also estimated that 24 percent of all EITC payments made in Fiscal Year 2013, or $14.5 billion, were paid in error. ...

The IRS has continually rated the risk of improper ACTC payments as low. However, TIGTA’s assessment of the potential for ACTC improper payments indicates the ACTC improper payment rate is similar to that of the EITC. Using IRS data, TIGTA estimates the potential ACTC improper payment rate for Fiscal Year 2013 is between 25.2 percent and 30.5 percent, with potential ACTC improper payments totaling between $5.9 billion and $7.1 billion. In addition, IRS enforcement data show the root causes of improper ACTC payments are similar to those of the EITC.

New York Times, Billions in Child Tax Credits Were Invalid, U.S. Audit Finds

Gov't Reports, IRS News, Tax | Permalink


I am staring at an agent report right now attempting to assess preparer penalties against a client for inadequate records in regard to the EITC. The penalties are in the tens of thousands. To say the IRS is doing nothing is absurd. Maybe if agencies had adequate staffing to go after cheats fraudulent preparers would be dissuaded.Not to mention the Medicaid/Medicare fraud perpetuated by healthcare organizations.

Posted by: Daniel | Dec 16, 2014 7:23:45 AM

Actually, the problem begins in Congress. As long as we, the taxpayers, allow Congress to sweep spending under the rug via tax expenditures, versus cutting checks directly from the Treasury, this kind of fraud will continue.
It gets worse. The administration plans on lowering the age limit for single people to quality for the earned income credit to 19. Next, it plans on tying the earned income limits to minimum wage. Do you see where this is headed?

Posted by: Dale Spradling | Dec 16, 2014 6:44:49 AM

So What! A few billion here and there and we have tax Fraud. No big deal!

Anytime the governmental hands out free money, some people will abuse the system. So what is the IRS and the federal government going to do - stand-by and wait for the system to correct itself, or is the IRS and or the federal government going to take steps to correct the abuse by placing the abusers in jail, take back the incorrect payments, or invent another system that will take more money?

Of course, we will get right on it, and have everything fixed by New Year Day. Note, I did not type in a year. That is the usual answer.

This problem been around for years, and this isn't the first report published about the overpayments. But, we continue to fund this abuse by feeding the animals that abuse.

Thanks for pointing out that someone else knows about the abuse - if we could just get the folks in the federal government to take some action, the taxpayers of the US may see some relief.

Posted by: don wilson | Dec 15, 2014 12:45:31 PM