TIGTA Faults IRS for Insufficient Vetting of Tax Credits

Chris Gaetano
Published Date:
May 16, 2019
Earned income credit

The Treasury Inspector General for Tax Administration (TIGTA) has found that the IRS did not sufficiently flag for further review millions of returns involving tax credits that had income discrepancies. 

Overall, TIGTA identified over 2.2 million returns with an income discrepancy of $1,000 or more from what was reported on returns to what was report on Forms W-2 that were nonetheless not selected for further review by the IRS. These taxpayers received over $10.1 billion, which included $6 billion in Earned Income Tax Credits (EITCs) and over $1.9 billion in Additional Child Tax Credits. TIGTA found that the IRS continues to incorrectly rate the improper payment risk associated with the Additional Child Tax Credit, the American Opportunity Tax Credit, and the Premium Tax Credit, and that this incorrect rating allows the IRS to circumvent the reporting of required information for these programs to the Department of the Treasury for inclusion in the Agency Financial Report.

TIGTA did note, however, that the IRS has been taking corrective action to address prior deficiencies the inspector general had previous reported. For example, it initiated a pilot program to identify and address erroneous EITC claims by individuals who were issued a "nonwork" Social Security number. It is also developing interim processes to better use Social Security Administration transcript information to identify and recover erroneous refundable credit claims. 

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