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TIGTA Finds IRS Mistakes in Distributions of Child Tax Credit Payments

S.J. Steinhardt
Published Date:
Sep 29, 2022

Millions of eligible families who should have received advance payments of the Child Tax Credit last year did not, while millions of others who did not qualify received them instead, according to a Treasury Inspector General for Tax Administration (TIGTA) report.

While lauding the IRS for its swiftness in implementing the accuracy of the Advance Child Tax Credit Periodic Payments  provision of the American Plan Rescue Act (ARPA) , TIGTA’s audit found that, “of 178.9 million payments made between July and November 2021, totaling more than $76.7 billion … the IRS correctly sent more than 175.6 million payments (98 percent) totaling about $75.6 billion. However, 3.3 million payments, totaling over $1.1 billion, were sent to 1.5 million taxpayers who should not have received the payment. Further, the IRS did not send 8.3 million payments, totaling about $3.7 billion, to 4.1 million eligible taxpayers.”

The report noted that the legislation became law on March 11, 2021, and that the IRS started issuing the first monthly payments on July 15 of that year, only four months later. “As of December 2021, the IRS had issued 216.9 million payments totaling $93.5 billion,” the report noted.

ARPA “increased the amount of the Child Tax Credit from $2,000 to $3,000 per child under the age of 18 ($3,600 for children under the age of six) for Tax Year 2021 only and made the credit fully refundable to eligible taxpayers. The increased Child Tax Credit is reduced (phased out) for taxpayers with adjusted gross income that exceeds $75,000 ($112,500 for head of household and $150,000 for married couples filing a joint return and qualifying widow(er)s,” the report explained.

As a result of its findings, TIGTA made five recommendations to the IRS. They include the “need to take actions to prevent taxpayers from receiving additional improper advance Child Tax Credit payments, inform taxpayers of the possibility that their advance payments may have been sent to other accounts the taxpayers may own, and validate incoming files from third-party sources prior to their use.”

The latter recommendation was in response to TIGTA’s finding that “11,459 payments, totaling $4.2 million, were erroneously sent to 523 bank accounts. The IRS also erroneously updated 1,610 taxpayers’ direct deposit information with bank account information associated with a payroll allotment account (e.g., a health savings account).”

The IRS agreed with all of the recommendations, according to the report. The agency "posted transaction codes on the impacted accounts to block additional payments to ineligible taxpayers, and [it] plans to implement procedures to validate incoming files from third-party sources prior to their use."

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