Even though the Internal Revenue Service has reported an overall decline in the improper payment rate for the Earned Income Tax Credit since fiscal year 2003, the amount of payments made in error has increased from $10.5 billion in fiscal year 2003 to $14.5 billion in fiscal year 2013, according to a new government report.
The IRS’s fiscal year 2013 EITC improper payment report to the Treasury Inspector General for Tax Administration estimates that in fiscal year 2013, EITC claims totaled approximately $60 billion, while 24 percent of the EITC payments were paid in error, according to a
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The new report focused on the IRS’s compliance with Executive Order 13520, Reducing Improper Payments and Eliminating Waste in Federal Programs, which requires TIGTA to assess the IRS’s compliance with the order on an annual basis. Executive Order 13520 aimed to increase federal agencies’ accountability for reducing improper payments while continuing to ensure that their programs serve and provide access to their intended beneficiaries. In the new report, TIGTA acknowledged that the IRS has taken steps to ensure access and participation by eligible individuals. The IRS estimates that the participation rate for individuals who are eligible to receive the EITC was nearly 80 percent for tax year 2010.
However, TIGTA pointed out that the IRS is not in compliance with certain requirements of Executive Order 13520 for fiscal year 2013. For example, the IRS has not established annual improper payment reduction targets as required.
Nonetheless, the IRS is making some progress related to its inability to comply with this requirement, TIGTA acknowledged. For instance, the IRS has received approval from the Office of Management and Budget to establish and report supplemental measures in lieu of annual reduction targets.
While the IRS is currently not in compliance with the quarterly reporting requirement for high-dollar improper EITC payments (that is, payments totaling more than $5,000) for fiscal year 2013, according to TIGTA, new revisions to the quarterly reporting requirements make it unlikely that the IRS would be required to report any quarterly high-dollar payments for fiscal years 2014 and beyond.
TIGTA made no recommendations in the report. In response to the report, IRS CFO Robin Canady wrote, “The Earned Income Tax Credit (EITC) is the Treasury Department's only high risk program and poses numerous challenges with respect to improper payments and reporting.”
Canady also reiterated some of the IRS’s objections to the report last month on the EITC and the ACTC: “As we reported in our response to your performance audit on the Additional Child Tax Credit (ACTC), the IRS disagrees with your assertion that our risk assessments do not accurately reflect the risk associated with the ACTC payments and TIGTA's potential outcome measure estimates.”
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