IRS Failure to Prevent EIC Errors

Post Date: 10/28/13
Last Updated: 10/30/13

Summary

Cross References
- Treasury Inspector General for Tax Administration report dated August 28, 2013

A recent report by the Treasury Inspector General for Tax Administration (TIGTA) says the IRS has made little improvement in reducing improper Earned Income Tax Credit (EITC) payments since being required to report estimates of these payments to Congress. The IRS' fiscal year 2012 improper payment report to TIGTA indicates that EITC payments totaled nearly $62 billion. The IRS estimated that 21% to 25% of the EITC payments made in fiscal year 2012 were paid in error.

The IRS said the complexity of the EITC program as well as the need to balance the reduction in improper payments while still encouraging individuals to use the credit are the main reasons for the errors. All of the factors listed in the report that contributes to EITC errors include:
- Complexity of the tax law, including the need for congressional authorization of math error authority.
- Structure of the EITC.
- Confusion among eligible claimants.
- High turnover of eligible claimants.
- Unscrupulous tax return preparers.
- Fraud.

See printable version for remainder of article and a table outlining the IRS' estimated EITC improper payments for fiscal years 2003 through 2012.
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