IRS paid more than $110B in improper tax credits

WASHINGTON — The Internal Revenue Service paid out more than $110 billion in tax credits over the past decade to people who didn’t qualify for them, according to a Treasury report released Tuesday.

The Earned Income Tax Credits were intended for poor working families. In his report, IRS inspector general J. Russell George said more than one-fifth of all credits paid under the program went to people who didn’t qualify.

“The IRS should be commended for implementing numerous processes to educate Americans and identify and prevent improper EITC payments,” George said in a statement. “Unfortunately, it is still distributing more than $11 billion in improper EITC payments each year and that is disturbing.”

“The IRS must do a better job of reining in improper payments in this and in other programs,” George added.

IRS efforts are hampered by unscrupulous tax preparers as well as honest families that have trouble figuring out how to calculate the complicated credit, the report said.

“The IRS appreciates the inspector general’s acknowledgement of all our work to implement processes that identify and prevent improper EITC payments,” the IRS said in a statement. “Every year, the IRS conducts 500,000 EITC audits as part of a broader enforcement strategy, and EITC claims are twice as likely to be audited as other tax returns.”

The agency said it prevents “nearly $4 billion in improper claims each year and is committed to continuing to work to reduce improper claims.”

The EITC is one of the nation’s largest anti-poverty programs. In 2011, more than 27 million families received nearly $62 billion in credits.

The credit is attractive because, if it is larger than your total income tax bill, the IRS will pay you the difference. This is especially helpful to low-income families because many pay little or no federal income tax.

It also makes the credit more susceptible to fraud.

“Refundable tax credits are a nightmare to administer and lead to far too much of the American people’s money going out to those who aren’t eligible,” said Sen. Orrin Hatch of Utah, the top Republican on the Senate Finance Committee. “That the IRS can’t figure out how to rein in the improper Earned Income Tax Credit payments doesn’t bode well for the $1.1 trillion in ObamaCare subsidies.”

Using IRS statistics, the inspector general’s report provides an estimated range of improper EITC payments from 2003 through 2012. The report says the IRS paid out at least $110.8 billion in improper payments during the period, and perhaps as much as $132.6 billion.

The IRS says it is impossible to know the exact amount of improper EITC payments without auditing all 27 million taxpayers who received them, which isn’t feasible.

The amount of improper payments ballooned during the recent economic slump, hitting at least $15.3 billion in 2010, the report said. For 2012, the improper payments totaled between $11.6 billion and $13.6 billion.

Families earn the credits by working and earning money, though there are income limits. The size of the credit depends on your income and the number of children you have.

This year, a married couple with three or more children can earn up to $51,567 and still qualify for the credit. A married couple with two children can earn up to $48,378 and still qualify, according to the IRS.

The maximum credit this year is $6,044 for families with three or more children. The maximum credit for families with two children is $5,372.

Talk to us

> Give us your news tips.

> Send us a letter to the editor.

> More Herald contact information.

More in Local News

A firefighter stands in silence before a panel bearing the names of L. John Regelbrugge and Kris Regelbrugge during the ten-year remembrance of the Oso landslide on Friday, March 22, 2024, at the Oso Landslide Memorial in Oso, Washington. (Ryan Berry / The Herald)
‘Flood of emotions’ as Oso Landslide Memorial opens on 10th anniversary

Friends, family and first responders held a moment of silence at 10:37 a.m. at the new 2-acre memorial off Highway 530.

Julie Petersen poses for a photo with images of her sister Christina Jefferds and Jefferds’ grand daughter Sanoah Violet Huestis next to a memorial for Sanoah at her home on March 20, 2024 in Arlington, Washington. Peterson wears her sister’s favorite color and one of her bangles. (Annie Barker / The Herald)
‘It just all came down’: An oral history of the Oso mudslide

Ten years later, The Daily Herald spoke with dozens of people — first responders, family, survivors — touched by the deadliest slide in U.S. history.

Victims of the Oso mudslide on March 22, 2014. (Courtesy photos)
Remembering the 43 lives lost in the Oso mudslide

The slide wiped out a neighborhood along Highway 530 in 2014. “Even though you feel like you’re alone in your grief, you’re really not.”

Director Lucia Schmit, right, and Deputy Director Dara Salmon inside the Snohomish County Department of Emergency Management on Friday, March 8, 2024, in Everett, Washington. (Ryan Berry / The Herald)
How Oso slide changed local emergency response ‘on virtually every level’

“In a decade, we have just really, really advanced,” through hard-earned lessons applied to the pandemic, floods and opioids.

Ron and Gail Thompson at their home on Monday, March 4, 2024 in Oso, Washington. (Olivia Vanni / The Herald)
In shadow of scarred Oso hillside, mudslide’s wounds still feel fresh

Locals reflected on living with grief and finding meaning in the wake of a catastrophe “nothing like you can ever imagine” in 2014.

Rep. Suzan DelBene, left, introduces Xichitl Torres Small, center, Undersecretary for Rural Development with the U.S. Department of Agriculture during a talk at Thomas Family Farms on Monday, April 3, 2023, in Snohomish, Washington. (Olivia Vanni / The Herald)
Under new federal program, Washingtonians can file taxes for free

At a press conference Wednesday, U.S. Rep. Suzan DelBene called the Direct File program safe, easy and secure.

Former Snohomish County sheriff’s deputy Jeremie Zeller appears in court for sentencing on multiple counts of misdemeanor theft Wednesday, March 27, 2024, at Snohomish County Superior Court in Everett, Washington. (Ryan Berry / The Herald)
Ex-sheriff’s deputy sentenced to 1 week of jail time for hardware theft

Jeremie Zeller, 47, stole merchandise from Home Depot in south Everett, where he worked overtime as a security guard.

Everett
11 months later, Lake Stevens man charged in fatal Casino Road shooting

Malik Fulson is accused of shooting Joseph Haderlie to death in the parking lot at the Crystal Springs Apartments last April.

T.J. Peters testifies during the murder trial of Alan Dean at the Snohomish County Courthouse on Tuesday, March 26, 2024 in Everett, Washington. (Olivia Vanni / The Herald)
Bothell cold case trial now in jury’s hands

In court this week, the ex-boyfriend of Melissa Lee denied any role in her death. The defendant, Alan Dean, didn’t testify.

A speed camera facing west along 220th Street Southwest on Tuesday, Nov. 21, 2023 in Edmonds, Washington. (Olivia Vanni / The Herald)
New Washington law will allow traffic cams on more city, county roads

The move, led by a Snohomish County Democrat, comes as roadway deaths in the state have hit historic highs.

Mrs. Hildenbrand runs through a spelling exercise with her first grade class on the classroom’s Boxlight interactive display board funded by a pervious tech levy on Tuesday, March 19, 2024 in Marysville, Washington. (Olivia Vanni / The Herald)
Lakewood School District’s new levy pitch: This time, it won’t raise taxes

After two levies failed, the district went back to the drawing board, with one levy that would increase taxes and another that would not.

Alex Hanson looks over sections of the Herald and sets the ink on Wednesday, March 30, 2022 in Everett, Washington. (Olivia Vanni / The Herald)
Black Press, publisher of Everett’s Daily Herald, is sold

The new owners include two Canadian private investment firms and a media company based in the southern United States.

Support local journalism

If you value local news, make a gift now to support the trusted journalism you get in The Daily Herald. Donations processed in this system are not tax deductible.