IRS Sent Out at Least $11.6 billion in Improper Payments Last Year, Report Says

The Internal Revenue Service “made little improvement” in reducing improper payments with the Earned Income Tax Credit program, according to a recently released report from the Treasury Inspector General for Tax Administration.

In 2012, between 21 and 25 percent of EITC payments made by the IRS were faulty, costing taxpayers between $11.6 billion and $13.6 billion, TIGTA said. From fiscal 2003 through fiscal 2012, the IG estimates that the sum of the improper payments was between $110.8 billion and $132.6 billion.

“IRS management stated that they do not plan to create specific and meaningful EITC improper payment reduction targets for the immediate future,” the report said. Further errors, however, will cause the agency to miss targets set by 2010 Improper Payments Elimination and Recovery Act and will force the Treasury Department and the Office of Management and Budget to “review” the agency’s funding, the report indicated.

The EITC is a federal program providing tax refunds to many low-income families and individuals. It was established in 1975 and has become one of the government’s primary anti-poverty programs, according to the Tax Policy Center.

During a hearing held Thursday by the House Ways and Means Subcommittee on Oversight, Rep. Diane Black, R-Tenn., voiced her concern over the agency’s inability to follow the recommendations put forth by the TIGTA.

Acting IRS Commissioner Steve Miller agreed that the agency was not in compliance, and noted that he would provide further details in a written response. He noted that the improper payments rate was “the best we’ve ever been in seven years.”

Miller also emphasized the sheer size of the program and the “churn” of its participants. He said there were 55 million participating in the EITC in 2012 and added that improper payments “were not all fraud” and attributed some of the errors to mistakes that people made.

However, the impact of sequestration may mean a reduction in the agency’s ability to process payments. Miller told the panel that the cuts facing the agency—especially through furloughs—would inhibit the agency’s work in the near future.

“We’ll continue our efforts to be fiscally prudent and make wise investments and strategic priorities in enforcement services and business modernization,” Miller said. “However, as I’ve noted, without a change in the current budget environment, the American people will see an erosion in our ability to serve them.”

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