IRS refunds billions to ‘taxpayers’ who don’t deserve ‘refunds’

Federal auditors say a quarter of all checks sent out by the Earned Income Tax Credit program are undeserved, making it the second highest source of improper payments from the federal government.

The EITC is a kind of reverse-tax program for low- and moderate- income individuals. If the federal tax credit is more than the amount of taxes owed, the individual gets a “refund” check. In tax year 2010, the maximum EITC for a single individual was $457, going up to $5,666 for a couple with three or more qualifying children.

The loss to taxpayers from the IRS’s lackadaisical enforcement of its own rules was a staggering $11 to $13 billion in FY 2009 alone, reports the Treasury Inspector General for Tax Administration.

And despite an executive order, precious little progress has been made in reducing EITC fraud since 2002, when Congress first required the Internal Revenue Service to report it.

 “Using IRS estimates for Fiscal Year 2009, it is likely that the IRS will have issued anywhere from $55 billion to $65 billion in improper payments by Fiscal Year 2014,” the TIGTA report noted.

Although TIGTA provided IRS with a set of specific actions it could take to reduce the volume of improper payments, IRS has not implemented all of them. The agency’s lame excuse:

“IRS management noted that reduction targets were not set because the IRS has to balance enforcement efforts among different taxpayer income levels.”

Funny, IRS has no trouble differentiating “among different taxpayer income levels” when it puts the screws on taxpayers to collect the money that it then allows to disappear via EITC.

Beltway ConfidentialUS

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