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IRS Struggling To Authenticate Tax Credit Claims: TIGTA

by Mike Godfrey, Tax-News.com, Washington

07 March 2018


Internal Revenue Service (IRS) processes do not properly prevent the issuance of refundable tax credit claims to taxpayers whose income is not supported, according to a March 1 audit report from the Treasury Inspector General for Tax Administration (TIGTA).

In December 2015, Congress enacted the Protecting Americans from Tax Hikes (PATH) Act of 2015, which contains a number of integrity provisions intended to reduce improper Earned Income Tax Credit (EITC), Child Tax Credit (CTC), Additional Child Tax Credit (ACTC), and American Opportunity Tax Credit (AOTC) claims. These provisions are projected to save approximately USD7bn over 10 years by reducing fraud, abuse, and improper payments in refundable tax credit programs.

However, TIGTA identified 1.4 million tax returns with a discrepancy in wages reported on the tax return and wages reported on third-party Forms W-2, Wage and Tax Statement, that were not reviewed by the IRS prior to refunds being released on February 15, 2017.

These taxpayers received approximately USD8.2bn in refunds, including USD4.3bn in the EITC and USD1.7bn in the ACTC.

"Late and missing Forms W-2 reduce the IRS's ability to verify EITC and ACTC claims before refunds are paid. The effectiveness of IRS efforts to verify wages reported on tax returns claiming the EITC and the ACTC is directly dependent on employers timely filing Forms W-2," said the TIGTA report.

"In addition, the methodology for correcting the ITIN issuance date continued to result in errors," said TIGTA.

The IRS agreed to implement measures in response to four of the five recommendations put forward by TIGTA and partially agreed to the other.

TAGS: tax | employees | audit | tax credits | Internal Revenue Service (IRS) | United States | Tax

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