One-fourth of IRS payments for several major refundable tax credits are being improperly made, costing the government billions of dollars, the Treasury's inspector general for tax said.
In a report released Tuesday, the inspector general found that the rate of improper payments remains high, at nearly 25 percent, for the earned income tax credit, the refundable portion of the child tax credit, and the American Opportunity tax credit, a benefit for college students.
While the IRS has acknowledged that the earned income tax credit is a high risk, it "still does not provide a valid assessment" of the rate of improper payments for other refundable credits, Inspector General J. Russell George said.
The problem of improper payments through refundable tax credits is a major one, in terms of both political ramifications and dollar amounts.
In fiscal 2016, 24 percent of earned income tax credit payments were made improperly, representing $16.8 billion, according to the report.
For the refundable part of the child tax credit, the error rate was 25.2 percent, accounting for $7.2 billion. Another $5.7 billion was paid out improperly through the American Opportunity tax credit, with an error rate of 24.2 percent.
In the past, conservative concerns about refundable tax credits being improperly paid out, and especially the possibility that some might be paid out to illegal immigrants, have held up tax legislation. Some Republicans have sought to tighten the rules around claims of refundable tax credits.
Improper payments are not necessarily fraud. For the earned income tax credit, most improper payments are related to the complexity of the eligibility rules for the credit and families tripping up over those rules.
Many Democrats have advocated significantly increasing the size of the earned income tax credit, an idea that has some support on the Right. House Speaker Paul Ryan, for example, has backed the idea of a bigger earned income tax credit as a pro-work measure.
A Ryan-authored report on poverty published in 2014 cited a range of studies finding that the credit has increased labor force parcipation.