Despite Reporting Improvements, IRS Continues to Issue Billions in Improper Payments

The IRS continues to hemorrhage billions of dollars in improper payments despite improvements in reporting data, according to a Treasury Department Office of Inspector General audit released last week.

The audit examines the IRS’ compliance with various legislation and executive orders regarding reporting requirements and improper payments, which have plagued the tax-collecting agency for years.

While TIGTA concluded that the IRS has improved improper payment reporting, it has not translated to “significant reductions” in actual improper payments paid out by the agency. According to the audit, IRS estimates about 25%—or $17.4 billion—of the $69 billion in total payments under the Earned Income Tax Credit program were improper.

Improper payments are those “that should not have been made, was made in an incorrect amount, or was made to an ineligible recipient,” the audit states.

Other audited programs faired similarly. The IRS estimates 15%—or $7.2 billion—of $48 billion doled out under the Additional Child Tax Credit were improper. The agency estimated another 26%—or $2.1 billion—of the total $8 billion issued under the American Opportunity Tax Credit were improper.

Auditors said the IRS “has made little progress to reduce the improper payments associated with the refundable credit programs it administers.” Auditors hinted that resource shortages at the agency allow many discrepancies to go unaddressed, and said IRS is not maximizing “tools provided by Congress” to address erroneous credit payments.

TIGTA made three recommendations to IRS, including the development of a comprehensive risk assessment of premium tax credit improper payments. IRS officials agreed with all three.