According to a new report from the Treasury Inspector General for Tax Administration (TIGTA), the IRS has failed at reducing improper payment rates to less than 10 percent while also not reporting improper payment rates for COVID-related programs.
A new report from TIGTA released May 9 revealed that for full year 2024, the IRS only partially complied with the reporting requirements in the Payment Integrity Information Act of 2019 (PIIA).
Like it did in previous years, the tax agency calculated improper payment rates for these four high-risk programs: Additional Child Tax Credit (ACTC), American Opportunity Tax Credit (AOTC), Earned Income Tax Credit (EITC) and Net Premium Tax Credit (PTC). The report said that the Inspectors General must assess and report every year on improper payment requirements contained in PIIA.
Aside from being unable to to lessen improper payment rates to under 10 percent, the IRS did not report improper payment rates for pandemic-related programs due to its belief that this would be "an inefficient use of resources" considering that the COVID programs are short-term. But, the agency is still examining the risk for COVID-related programs including the Employee Retention Credit.
The TIGTA had three recommendations in this report, including that the IRS request added legislative considerations to help limit the improper payments and examine the effect of the new processing procedures for returns claiming duplicate dependents. The IRS agreed with all of the recommendations.
Both the PIIA and the Office of Management and Budget (OMB) define an improper payment as any payment that should not have been made, was compensated in an incorrect amount or was remunerated to an ineligible recipient.
For fiscal year 2024, the IRS calculated improper payment estimates for four programs that meet the OMB’s definition of a high-priority program susceptible to improper payments. The OMB defines high-priority programs as those with improper payments resulting in monetary losses that are more than $100 million annually.
According to the TIGTA report, the full-year 2024 Department of the Treasury Agency Financial Report attributes the causes of refundable tax credit errors to factors including the complex statutory eligibility rules, the inability to verify taxpayer-provided information before issuing refunds, the absence of correctable error authority and a requirement to issue refunds within 45 days.
For instance, when there are taxpayers who claim the same dependent, the IRS cannot ascertain which taxpayer is eligible at the time a tax return is filed and the agency should process both claims and complete post-filing activities including issuing notices or conducting audits to determine eligibility.
The TIGTA report said that, for the 2025 Filing Season, the IRS implemented a change that will accept electronically filed individual tax returns when a dependent has already been claimed on another return to lessen the taxpayer burden and issue timely refunds. IRS management said that the impact was only minimal from the duplicate dependent condition on total improper payments.
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