The Treasury Department's inspector general for tax administration has estimated that the Internal Revenue Service issued between $11.6 billion and $13.6 billion in improper payments through its Earned Income Tax Credit (EITC) program for the fiscal year ended 2012. The EITC is a welfare program that is supposed to help low income families or individuals through a refundable income tax credit.

In a report which was issued this past February 25th, (http://www.treasury.gov/tigta/auditreports/2013reports/201340024fr.pdf.) the Treasury Department found that for the second year in a row, the IRS has failed to comply with the Improper Payments Elimination Act which was passed in 2010. Overall, the agency “has made little improvement in reducing EITC improper payments,” the report said.

The amounts of improper EITC payments are even more staggering when viewed over the 10 year period that ended with the just completed fiscal year. In fiscal years 2003 through 2012 the total improper EITC payments is estimated to be between $110.8 and $132.6 billion. What is even more troubling is the report's admission that "the IRS has previously acknowledged that further reductions in the EITC error rate will be difficult to achieve." In an era of yawning budget deficits and rising burden on American taxpayers, it is important for government to do its fair share by reducing waste, fraud and abuse.

Farshad Yashar
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Farshad Yashar

CATEGORIES Taxing Thoughts,

Farshad Yashar, CPA, CFA, has more than 25 years of tax experience with two major accounting firms. He has extensive experience in taxation of corporations, flow-through entities, financial products and real estate. His experience includes advising buy and sell-side clients with respect to tax…Learn More