The Inspector General for the IRS said Thursday that the tax collection agency continues to be at risk of paying out billions of dollars in fraudulent Earned Income Tax Credit payments each year, and that there’s nothing the IRS can do about it.
The Treasury Inspector General for Tax Administration released a report that said almost 25 percent of EITC payments issued last year should not have been issued. That amounts to $15.6 billion in payments under a program that’s meant to boost low and moderate-income people and families.
The IG noted that last year’s omnibus spending bill gave the IRS some tools to address the problem, but not enough to stop it completely. Specifically, it said the bill didn’t give the IRS expanded authority to actually correct errors in EITC payments when it finds them, and that the IRS doesn’t have the resources to police the fraudulent payments.
“Without this authority, the IRS continues to be unable to address the majority of potentially erroneous EITC claims it identifies,” the IG wrote. “As a result, billions of dollars in potentially erroneous EITC claims go unaddressed each year,” it added.
The report said the IRS has requested “correctable error authority” as part of its 2017 budget submission. But it said Congress has so far not granted this authority.
The lack of any authority to stop the payments means they’ll keep going out, even when the IRS knows they may be fraudulent. For example, the report noted that the IG in 2014 found that there were 676,992 tax returns claiming EITC credits that couldn’t be matched up with corresponding wages.
The report said in those cases, third-party W-2 forms were never sent to the IRS to back up those claims.
“These 676,992 tax returns claimed EITCs totally more than $1.7 billion,” the report said. “We will be conducting a separate audit to evaluate the IRS’ implementation of these provisions.”
