I.G. report: IRS needs to do more on improper EITC payments

The Treasury Department’s inspector general for tax administration reported that between $11 billion and $13 billion in Earned Income Tax Credit (EITC) payments were wrongly given out in the 2009 fiscal year. The IRS has been required to report estimates of those improper payments to Congress since 2002, and the inspector general also found that the agency was making little headway in improving oversight in this area.

The I.G. report, released this week, found that the IRS had not set “quantifiable targets” in reducing the number of wrongly issued payments, which the agency currently estimates occurs between 23 percent and 28 percent of the time. The IRS is required by executive order to report set targets on reducing improper payments to both the Office of Management and Budget and the tax administration inspector general 

Both that inspector general, Russell George, and a top senator expressed disappointment in how the IRS was handling the situation. 

“While the Earned Income Tax Credit helps many deserving Americans, it is well past time for the IRS to reduce the amount of improper payments in the program,” George said in a statement. “The loss of billions of dollars in improper EITC payments annually calls for aggressive and immediate action.”

For his part, Sen. Orrin Hatch (R-Utah), the ranking member of the Senate Finance Committee, said he had already conveyed his displeasure to the IRS.

The inspector general’s report “is an absolute indictment on how badly the IRS has handled this,” Hatch said in a statement.

The IRS agreed with the inspector general’s recommendation to set both targets to reduce improper payments and strategies to help meet those goals. 

It also said that it believed that its current efforts to bring greater oversight to tax preparers would help roll back the number of wrongly issued payments, but the inspector general does not believe that is an aggressive enough response. 

The EITC is tailored for individuals and families with low to moderate incomes. The Treasury Department has pushed for years to ensure that taxpayers who are eligible for the credit actually claim it.