WASHINGTON (AP) — The Internal Revenue Service paid out more than $110 billion in tax credits over the past decade to people who didn’t qualify for them, according to a Treasury report released Tuesday.
The Earned Income Tax Credits were intended for poor working families. In his report, IRS inspector general J. Russell George said more than one-fifth of all credits paid under the program went to people who didn’t qualify.
“The IRS should be commended for implementing numerous processes to educate Americans and identify and prevent improper EITC payments,” George said in a statement. “Unfortunately, it is still distributing more than $11 billion in improper EITC payments each year and that is disturbing.”
“The IRS must do a better job of reining in improper payments in this and in other programs,” George added.
IRS efforts are hampered by unscrupulous tax preparers as well as honest families that have trouble figuring out how to calculate the complicated credit, the report said.
“The IRS appreciates the inspector general’s acknowledgement of all our work to implement processes that identify and prevent improper EITC payments,” the IRS said in a statement. “Every year, the IRS conducts 500,000 EITC audits as part of a broader enforcement strategy, and EITC claims are twice as likely to be audited as other tax returns.”
The agency said it prevents “nearly $4 billion in improper claims each year and is committed to continuing to work to reduce improper claims.”
The EITC is one of the nation’s largest anti-poverty programs. In 2011, more than 27 million families received nearly $62 billion in credits.
The credit is attractive because, if it is larger than your total income tax bill, the IRS will pay you the difference. This is especially helpful to low-income families because many pay little or no federal income tax.