December 09,2014

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Hatch: New Report Outlines Billions Wasted on Mismanaged Tax Credits

WASHINGTON – Today, Finance Committee Ranking Member Orrin Hatch (R-Utah) slammed the Internal Revenue Service (IRS) for wasting billions of taxpayer dollars on mismanaged tax credits after a new report from the Treasury Inspector General for Tax Administration (TIGTA) found that the refundable Earned Income Tax Credit (EITC) and Additional Child Tax Credit (ACTC) were fraught with waste. 

TIGTA said that the IRS has “not developed processes to quantify or identify the root causes of improper ACTC (Additional Child Tax Credit) payments,” which TIGTA estimated at between 25.2 and 30.5 percent.  TIGTA also faulted the IRS for failing to reduce improper payments of the refundable Earned Income Tax Credit. TIGTA estimated that the IRS improperly awarded up to $7.1 billion in ACTC payments and $14.5 billion in EITC payments for fiscal year 2013.  The report said that “[s]ignificant changes in IRS compliance processes would be necessary to make any significant reduction in improper payments.”

“The IRS’s inability to properly administer these refundable tax credits fails American taxpayers and calls into question the Administration’s ability to safeguard the refundable tax credits included in the President’s health law,” Hatch said.  “Instead of addressing the IRS’s gross mismanagement, the Administration has repeatedly sought to permanently increase these refundable tax credits without reform – further enhancing waste, fraud and abuse. What’s more, the President’s recent executive order on immigration will only add to the number of people able to receive refundable Earned Income Tax Credits, given the Social Security number requirement. Working families deserve responsible tax relief, not a broken system that wastes hard-earned dollars due to bureaucratic incompetence. With Obamacare refundable tax credits going out the door and the number of those eligible for refundable Earned Income Tax Credits increasing because of the President’s executive order, the Administration owes it to hard working taxpayers to crack down on these egregious oversights. ”

For tax year 2012, the IRS estimated that $63 billion was paid out in refundable Earned Income Tax Credits and $26.6 billion was paid out in refundable Additional Child Tax Credits. The only individuals eligible to receive ACTC payments are those that do not pay any federal income tax for the year they receive the ACTC.