IRS Issued Billions in Improper Refunds, Report Says

The Washington Post Reports that the Internal Revenue Service issued more than $11 billion in improper payments through its Earned Income Tax Credit program last year, according to an inspector general’s report released this week.

Treasury Department Deputy Inspector General Michael McKenney found that the IRS has failed to comply for two consecutive years with the Improper Payments Elimination Act, which President Obama signed in 2010. The law requires federal agencies to reduce erroneous payments to a rate of less than 10 percent.

The IRS estimates that at least 21 percent of its EITC payments in 2012 were faulty. That rate showed a decline compared to the previous nine years, but improper payments over the same period increased about 22 percent, rising to at least $11.6 billion, according to the inspector general’s report.

Overall, the agency “has made little improvement in reducing EITC improper payments,” the report said.

The Earned Income Tax Credit awards tax refunds to many low-income individuals and families, especially those who have children.

The IRS said Tuesday that EITC errors arise from a variety of causes, including the complex nature of the law, the ever-shifting EITC-eligible population, and the nature of the credit.

“The reduction of improper payments is a top priority for the IRS, and we are making progress in this area,” the agency said in a statement. “We will continue to work hard to get the credit to those who are eligible while protecting against improper payments.”

by Dave McClure, Industry Writer