Tuesday, February 15, 2011

IRS Can’t Stop Paying Billions in Bogus EITC Claims

According to a from the Treasury Inspector General for Tax Administration the agency made little improvement in reducing improper Earned Income Tax Credit payments. Government estimates suggest that up to 28% of erroneous EITC payments are made each year, costing taxpayers between $11 and $13 billion per year.

Accounting Today reports:

    This is an outrageously high improper payment rate," said Sen. Chuck Grassley, R-Iowa, in response to the report. "It’s higher than Medicare’s improper payment rate. The taxpayers can’t sustain a failure rate of one-fourth and on the way to one-third. For more than eight years, the IRS hasn’t made a dent in this problem. It’s more than enough time to figure out a way to fix it. The report says the IRS doesn’t have the resources to go after all of the improper payments in this program. This is a good indication of how the IRS is poorly equipped to handle the huge new responsibilities of health care reform. If the IRS can’t handle its existing responsibilities, it won’t be able to handle its new responsibilities under health care reform. Maybe if the White House focused more on what’s already owed, it wouldn’t need to propose tax increases, such as the one on employers to pay for unemployment benefits just disclosed this week.”

    Executive Order 13520 requires the IRS to intensify its efforts and set targets to reduce EITC improper payments and to report its activities to the Office of Management and Budget and TIGTA.

    The order also requires TIGTA to assess the level of risk associated with the EITC program, determine the extent of oversight warranted and provide the IRS with recommendations to reduce EITC improper payments.

    In its June 14, 2010 report to the OMB and TIGTA, the IRS did not provide any quantifiable targets to reduce EITC improper payments. IRS management noted that it did not set reduction targets because of the need to balance its enforcement efforts among different taxpayer income levels.

Continue reading at AccountingToday.com...

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