May 05,2015

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Aaron Fobes, Julia Lawless (202)224-4515

TIGTA: IRS Allowed Billions in Potentially Erroneous Education Tax Credits

New Report Latest on Agency’s Failure to Accurately Administer Refundable Credits


WASHINGTON – Senate Finance Committee Chairman Orrin Hatch (R-Utah) today highlighted a new report from the Treasury Inspector General for Tax Administration (TIGTA) which found that an estimated $5.6 billion in potentially erroneous education credits were received by more than an estimated 3.6 million taxpayers on their 2012 tax returns. 

“The findings of today’s TIGTA report once again spell trouble for the IRS and call into question their ability to properly administer the American Opportunity Tax Credit (AOTC),” Hatch said.  “This partially refundable tax credit was established as part of the stimulus, but unfortunately, as today’s report shows, the IRS has only succeeded in stimulating waste by not effectively identifying erroneous claims. Even worse, TIGTA found that ineligible individuals continue to receive erroneous credits.  The IRS owes it to American families and hardworking taxpayers to properly safeguard their hard-earned dollars and not dole them out to people who are not qualified to receive such credits.” 

Additional findings from the report include:

  • “TIGTA estimates that 1) more than 2 million taxpayers received more than $3.2 billion in education credits for students with no Form 1098-T, Tuition Statement; 2) more than 1.6 million taxpayers received approximately $2.5 billion in education credits for students attending ineligible institutions; 3) 419,827 taxpayers received more than $650 million for students who were used to claim the AOTC for more than four tax years; and 4) 427,345 taxpayers received approximately $662 million in AOTCs for students who attended school less than half-time.”
  • “TIGTA made five recommendations to the IRS to improve the detection and prevention of erroneous education credit claims, including that the IRS work with the Department of the Treasury to consider a legislative proposal to move the required filing date for Forms 1098-T to January 31 so that this information can be used at the time tax returns are processed to help identify improper education credit claims.  The IRS agreed to implement two of the recommendations but did not agree to implement the other three.  TIGTA noted its concern with the IRS's response to the recommendations in the report.”