Taxpayers Were Assessed Additional Tax for Advance
Earned Income Credit Payments Not Received
June 2003
Reference Number: 2003-40-126
This report has cleared the Treasury
Inspector General for Tax Administration disclosure review process and
information determined to be restricted from public release has been redacted
from this document.
June
17, 2003
MEMORANDUM FOR
COMMISSIONER, WAGE AND INVESTMENT DIVISION
FROM: Gordon C. Milbourn III /s/ Gordon C.
Milbourn III
Acting Deputy Inspector
General for Audit
SUBJECT: Final Audit Report - Taxpayers Were
Assessed Additional Tax for Advance Earned Income Credit Payments Not Received
(Audit # 200340028)
This
report presents the results of our review to determine if the Internal Revenue
Service (IRS) had reasonable assurance during tax return processing that the
Advance Earned Income Credit (AEIC) payments reported by taxpayers were
correct.
The Congress established the AEIC in 1978 to allow employees who are eligible for the Earned Income Tax Credit (EITC) to receive a portion of that credit in advance with their pay during the year. During Tax Year (TY) 2001, employees could receive up to $1,457 in advance. Employees who choose to receive the AEIC file an Earned Income Credit Advance Payment Certificate (Form W-5) with their employer, who calculates and administers the credit. Employers report the AEIC payments in Box 9 of an employee’s Wage and Tax Statement (Form W-2). These taxpayers are required to file a Federal tax return and report the AEIC payments as additional tax, which is offset by the EITC they may be entitled to receive.
The IRS processed over
297,000 TY 2000 and 2001 individual income tax returns with AEIC payments
totaling approximately $140 million during Calendar Years 2001 and 2002. Our analysis of tax account data for these 2
tax years determined that the IRS did not have reasonable assurance that an
estimated 22 percent of the returns with reported AEIC payments were processed
correctly in each tax year. This
represents approximately 65,000 taxpayers who may have been erroneously
assessed $26 million in tax for AEIC payments they did not receive.
We analyzed a judgmental
sample of 278 tax accounts with AEIC amounts greater than $4,008 in TY 2001 to
determine the accuracy of the $3.1 million in AEIC payment amounts captured by
IRS employees on the IRS computer system during tax return processing. For 274 (99 percent) accounts, over $3
million in AEIC payments were incorrect because either IRS employees
transcribed an incorrect AEIC payment amount or taxpayers incorrectly reported
the amount on their tax returns, causing erroneous assessments to some
accounts. These 274 accounts showed the
following:
·
For 35 (13 percent)
accounts – taxpayers unnecessarily paid all or a portion of the erroneous
assessments, made arrangements to pay, or were wrongly placed in the collection
process by the IRS.
·
For 153 (56 percent)
accounts – corrections were made as a result of actions initiated by 106
taxpayers after the IRS notified them of the additional tax assessment, or by
the IRS prior to assessing 47 taxpayers.
·
For 86 (31 percent)
accounts – taxpayers reported another type of tax on the AEIC payment line;
however, the error did not change the amount of the tax assessed.
Verification of information input
to computer systems helps ensure the data captured are accurate and complete
and serves as a defense to prevent and detect errors. The IRS does
not have procedures in place during processing to ensure that AEIC payments are
correctly captured from tax returns not reporting the EITC. The IRS does not key verify the AEIC payment
information or require employees to compare it to Box 9 of the Form W-2 for
accuracy.
We
recommended the Commissioner, Wage and Investment Division, establish
procedures to ensure the reported AEIC payment amounts are reconciled with the Form
W-2 amounts and correctly input during processing of individual income tax
returns.
Management’s
Response: IRS management agreed with the
recommendation and has already begun
corrective actions. Specifically, IRS management has updated the instructions
for the Code and Edit function to require tax examiners to compare the amount
of AEIC shown on the tax return to the amount listed as AEIC in Box 9 of the
Form W-2 and adjust the amount when needed.
They have also submitted requests for programming changes to create an
error condition:
(a)
When the amount of AEIC
claimed exceeds the maximum yearly allowance ($1,528 effective for processing
year 2004).
While IRS management agreed
with our actual benefits as described in Appendix IV, they did not agree with
the potential benefits of $26 million in tax for 65,000 taxpayers. The IRS believes that our calculations do
not take into consideration the fact that over 31 percent of the errors had no
effect on the taxpayer’s liability, 17 percent were corrected in processing,
and 39 percent were corrected in post-processing. In addition, 40 percent of the returns we reviewed indicated that
taxpayer error had caused the incorrect entry.
While these errors would still require correction, implementing our
recommendation would not reduce this cost.
As a result, the IRS believes that our benefit analysis should be
reduced to reflect these points.
Management’s complete response to the draft report is included as
Appendix V.
Office of Audit Comment: We cannot
make projections from results of a sample that has not been statistically
selected. In addition, we cannot
transpose these results to a separate noncongruent population. The IRS response referred to our testing of
a judgmental sample of 278 tax accounts with AEIC amounts greater than $4,008
in TY 2001. This analysis was to
determine the accuracy of the $3.1 million in AEIC payments captured for these
accounts by IRS employees on the IRS computer system during processing. We found that the IRS corrected 47 (17
percent) of the tax accounts prior to assessing the taxpayers and corrected 106
(39 percent) of the tax accounts as the result of actions initiated by the
taxpayers. In 86 (31 percent) of the
tax accounts, the error did not change the amount of the tax assessed. In a separate test of 60 original returns,
38 percent of the returns reviewed indicated taxpayer error as the cause of the
incorrect entry.
In a separate independent
test, we identified approximately 65,000 (22 percent of taxpayers claiming the
AEIC for TYs 2000 and 2001) taxpayers who claimed the AEIC but no EITC, and who
may have been erroneously assessed $26 million in tax for AEIC payments they
did not receive. Without controls to
identify returns claiming the AEIC but no EITC, the IRS does not have
reasonable assurance that these returns would be processed correctly.
Copies of this
report are also being sent to the IRS managers who are affected by the report
recommendation. Please contact me at
(202) 622-6510 if you have questions or Michael R. Phillips, Assistant
Inspector General for Audit (Wage and Investment Income Programs), at (202)
927-7085.
Appendix I – Detailed Objective, Scope, and Methodology
Appendix II – Major Contributors to This Report
Appendix III – Report Distribution List
Appendix IV – Outcome Measures
Appendix V – Management’s Response to the Draft Report
In 1975, the Congress authorized the
Secretary of the Treasury to amend the Internal Revenue Code to provide a
credit to taxpayers with certain earned income. This refundable credit, known as the Earned Income Tax Credit
(EITC), was established to offset the impact of Social Security taxes and
increases in cost of living expenses on low-income families and to encourage
them to seek employment rather than welfare.
The Internal Revenue Service (IRS) administers the credit through a reduction in the amount of tax owed, if any, on the individual tax return. The credit amount in excess of the amount of tax owed could be refunded to the taxpayer.
The Congress established the Advance Earned Income Credit (AEIC) in 1978 to allow eligible employees who (1) have at least one qualifying child, (2) fall within certain income limits, and (3) expect to claim the EITC on their tax return to receive part of the EITC in advance with their pay during the year. During Tax Year (TY) 2001, employees could receive up to $1,457 in AEIC.
Employees who choose to receive the AEIC file an Earned Income Credit Advance Payment Certificate (Form W-5) with their employer, who calculates and administers the credit. The Form W-5 remains in effect until the end of the calendar year unless the employee revokes it or files another Form W-5.
Employers report the AEIC payments in Box 9 of an employee’s Wage and Tax Statement (Form W-2). Taxpayers who receive AEIC payments are automatically required to file a Federal tax return and report the AEIC payments as additional tax, which is used to offset the EITC they may be entitled to receive.
While the volume of individual income tax returns processed with the EITC remained constant at approximately 19 million between TY 1999 and TY 2001, Figure 1 below shows that the volume of the tax returns processed with AEIC payments declined during these periods from 169,000 to 138,000.
Figure 1
Figure 1 has been removed due to its size. To see Figure 1, please go to the Adobe PDF
version of the report on the TIGTA Public Web Page.
The amount of AEIC payments reported by taxpayers also declined from $81 million to $67 million for the same period, contrary to the increase in EITC claims processed from $31 billion to $32.5 billion. Overall, less than 1 percent of the taxpayers who receive the EITC choose to receive the AEIC to offset the increases in their living expenses and Social Security taxes during the year.
The audit was conducted in the IRS National Headquarters in New Carrollton, Maryland; the Wage and Investment (W&I) Division Headquarters in Atlanta, Georgia; and the Atlanta Submission Processing Site between November 2002 and February 2003. The audit was conducted in accordance with Government Auditing Standards. Detailed information on our audit objective, scope, and methodology is presented in Appendix I. Major contributors to the report are listed in Appendix II.
The IRS processed over 297,000 TY 2000 and 2001 individual income tax returns with AEIC payments totaling approximately $140 million during Calendar Years 2001 and 2002. Our analysis of tax account data for these 2 tax years determined that the IRS did not have reasonable assurance that an estimated 22 percent of the returns with reported AEIC payments were processed correctly in each tax year. This represents approximately 65,000 taxpayers who may have been erroneously assessed $26 million in tax for AEIC payments they did not receive.
We analyzed a judgmental sample of 278 tax accounts with AEIC amounts greater than $4,008 in TY 2001 to determine the accuracy of the $3.1 million in AEIC payments captured for these accounts by IRS employees on the IRS computer system during tax return processing. We researched the IRS’ computer systems for tax account information showing tax adjustments to the accounts as a result of AEIC payment errors. For 274 (99 percent) accounts, over $3 million in AEIC payments captured were incorrect because either IRS employees erroneously transcribed the AEIC payment amounts or taxpayers reported a wrong amount on the AEIC payment line on their tax returns, causing erroneous assessments to some accounts. These 274 accounts showed the following:
· For 35 (13 percent) accounts – taxpayers unnecessarily paid all or a portion of the erroneous assessments, made arrangements to pay, or were wrongly placed in the collection process by the IRS.
· For 153 (56 percent) accounts – corrections were made as a result of actions initiated by 106 taxpayers after the IRS notified them of the additional tax assessment, or by the IRS prior to assessing 47 taxpayers.
· For 86 (31 percent) accounts – taxpayers reported another type of tax on the AEIC payment line; however, the error did not change the amount of the tax assessed.
The more specific details of the impact of the errors on the 274 taxpayers are provided below.
Taxpayers paid the erroneous tax assessments, made arrangements to pay, or were placed in the IRS’ collection process
In total, 35 taxpayers paid all or a portion of the erroneous assessments, made arrangements to pay, or were placed by the IRS in the collection process with accounts totaling over $267,000 in erroneous AEIC payment amounts. Tax account information indicated that the taxes paid or owed by these taxpayers equaled or closely matched the AEIC payment amounts.
·
For 14 taxpayers, the IRS assessed and collected over
$121,000 in taxes not actually owed.
Examples included
incorrectly reporting wages as AEIC payments and incorrectly reporting
dependent care benefits as AEIC, resulting in the payment of additional tax
that was not due.
· For 5 taxpayers, the IRS secured payment agreements for over $26,000 from erroneous tax assessments.
· For the remaining 16 taxpayers, the IRS assessed over $120,000 in taxes that were subsequently placed into the IRS collection process based on AEIC payments never received by the taxpayers.
We provided IRS management with information on these 35 taxpayers during the audit. They plan to further review the related tax accounts and take appropriate action.
The IRS corrected the errors after taxpayers requested tax abatements
For 106 accounts, the IRS had to correct approximately $1 million of the transcribed payments after taxpayers responded to IRS notices of a change in the amount of tax that was assessed. These accounts showed that after the notices were sent, the IRS abated the tax. The abatement equaled the AEIC payment or there was an indication on the account that the abatement included the erroneous AEIC payment.
Refunds for 91 of these taxpayers were delayed from 2 to 26 weeks. The average delay was 3 weeks. The IRS paid over $600 in interest, ranging from $2.62 to $153.03, to 18 of these taxpayers.
The IRS corrected the errors prior to the assessment
For 47 accounts, the IRS identified errors and corrected them during processing when the tax return was selected for error correction for another reason or during sample reviews of a few select notices to the taxpayers prior to issuance.
AEIC payment errors did not change the amount of taxes assessed
For 86 accounts, the taxpayer reported another type of tax on the AEIC payment line on the tax return or the IRS incorrectly transcribed “other tax” amounts as AEIC payments. These errors did not change the amount of the taxes assessed. The most common error was the tax on qualified plans, from line 55 of the United States Individual Income Tax Return (Form 1040). This line is directly above the AEIC payment line on the form.
A verification process can help prevent and detect errors
Verification of information input to computer systems helps ensure the data captured are accurate and complete and serves as a defense to prevent and detect errors. The IRS does not have procedures in place during processing to ensure that AEIC payments are correctly captured from tax returns not reporting the EITC. The IRS requires employees to neither compare the AEIC payment amount reported on the tax return (for example, line 56 on Form 1040) to Box 9 of the Form W-2 nor to key verify the AEIC payment amount for accuracy. Figures 2 and 3 below show the areas of each form discussed.
Figure 2
Figure 2 was removed
due to its size. To see Figure 2,
please go to the Adobe PDF version of the report on the TIGTA Public Web Page.
Figure 3
Form 1040, Advance
Earned Income Credit Line
Figure 3 was removed
due to its size. To see Figure 3,
please go to the Adobe PDF version of the report on the TIGTA Public Web Page.
We reviewed the tax returns for 60 of the 278 tax accounts in our sample and determined that IRS employees incorrectly transcribed the AEIC payment amounts for 36 (60 percent) tax accounts, totaling over $786,000. The taxpayer incorrectly reported the AEIC payment amount on 23 (38 percent), totaling over $576,000. Generally, either Box 9 of the Form W-2 did not show an AEIC payment amount or the taxpayer did not report Form W-2 income on the tax return. Both were good indications that the AEIC payment amounts were incorrect.
Trends indicated the AEIC errors were widespread
We conducted additional analysis of the 31,400 TY 2001 accounts processed with AEIC payments to identify trends that indicated the AEIC payment errors were widespread. The analysis identified the following trends that make the AEIC payment amounts that were processed highly questionable. In our opinion, taxpayers who qualify for the AEIC would not likely have these transactions normally occurring to their accounts:
· 9,013 (29 percent) accounts had $15.3 million in unpaid taxes due the IRS – $7.1 million in AEIC payments.
· 7,043 (22 percent) accounts had Adjusted Gross Income (AGI) between $32,122 and $50,000 –$3 million in AEIC payments.
· 5,807 (18 percent) accounts had AGI over $50,000 –$4.6 million in AEIC payments.
· 2,222 (7 percent) accounts were corrected by the IRS –$2.6 million in AEIC payments.
· 1,232 (4 percent) accounts had AEIC payments greater than $1,457 – $5.8 million in AEIC payments.
· 719 (2 percent) accounts had estimated tax payments totaling $14.5 million – $1.3 million in AEIC payments.
· 550 (2 percent) accounts did not report wages – $725,000 in AEIC payments.
· 52 (.2 percent) accounts had reported wages that were less than the AEIC amount – $668,000 in AEIC payments.
The
IRS also compiles data on certain income and tax items on selected tax return
series, such as Forms 1040, 1040A, and 1040 EZ. We reviewed these reports for TYs 1999 – 2001. The statistics captured on AEIC volumes and
payment amounts showed that, each year, the IRS processed tax returns with the
AEIC where the AGI amount reported was over $1 million, another strong
indication that the AEIC payment amounts on these tax returns were incorrect
and that the errors continued to occur each year. Excerpts taken from the reports and provided in Figure 4 below show
a breakdown by AGI categories from $100,000 and over for AEIC volumes and
payment amounts processed during these periods.
Figure 4
Figure 4 was removed
due to its size. To see Figure 4,
please go to the Adobe PDF version of the report on the TIGTA Public Web Page.
1. We recommend the Commissioner, W&I Division, establish procedures to ensure the reported AEIC payment amounts are reconciled with the Form W-2 amounts and correctly input during processing of individual income tax returns.
Management’s Response: IRS management agreed with the recommendation and has already begun corrective actions. Specifically, IRS management has updated the instructions for the Code and Edit function to require tax examiners to compare the amount of AEIC shown on the tax return to the amount listed as AEIC in Box 9 of the Form W-2 and adjust the amount when needed. They have also submitted requests for programming changes to create an error condition:
(a) When the amount of AEIC claimed exceeds the maximum yearly allowance ($1,528 effective for processing year 2004).
(b) Any time the AEIC is listed without a corresponding entry for the EITC (effective for implementation in January 2005).
While IRS management agreed with our actual benefits as described in Appendix IV, they did not agree with the potential benefits of $26 million in tax for 65,000 taxpayers. The IRS believes that our calculations do not take into consideration the fact that over 31 percent of the errors had no effect on the taxpayer’s liability, 17 percent were corrected in processing, and 39 percent were corrected in post-processing. In addition, 40 percent of the returns we reviewed indicated that taxpayer error had caused the incorrect entry. While these errors would still require correction, implementing our recommendation would not reduce this cost. As a result, the IRS believes that our benefit analysis should be reduced to reflect these points.
Office of Audit Comment: We cannot make projections from results of a sample that has not been statistically selected. In addition, we cannot transpose these results to a separate noncongruent population.
The IRS response referred to our testing of a judgmental sample of 278 tax accounts with AEIC amounts greater than $4,008 in TY 2001. This analysis was to determine the accuracy of the $3.1 million in AEIC payments captured for these accounts by IRS employees on the IRS computer system during processing. We found that the IRS corrected 47 (17 percent) of the tax accounts prior to assessing the taxpayers and corrected 106 (39 percent) of the tax accounts as the result of actions initiated by the taxpayers. In 86 (31 percent) of the tax accounts, the error did not change the amount of the tax assessed. In a separate test of 60 original returns, 38 percent of the returns reviewed indicated taxpayer error as the cause of the incorrect entry.
In a separate independent test, we identified approximately 65,000 (22 percent of taxpayers claiming the AEIC for TYs 2000 and 2001) taxpayers who claimed the AEIC and no EITC and who may have been erroneously assessed $26 million in tax for AEIC payments they did not receive. Without controls to identify returns claiming the AEIC and no EITC, the IRS does not have reasonable assurance that these returns would be processed correctly.
Appendix I
Detailed Objective, Scope,
and Methodology
The overall objective of this review was to determine if the Internal Revenue Service (IRS) had reasonable assurance during tax return processing that the Advance Earned Income Credit (AEIC) payments reported by taxpayers were correct. To accomplish our objective, we:
I.
Determined if the IRS is
accurately capturing the AEIC payment amount during the processing of the tax
returns.
A. Extracted electronic records for 136,578 Tax Year (TY) 2001
tax returns identified with AEIC payments from the 2002 Return Transaction File
(RTF) as of October 2002. The data were
obtained from the Treasury Inspector General for Tax Administration’s Data
Warehouse, which compiles and stores electronic data from various IRS computer
systems.
B. Selected a judgmental sample of 80 of 278 TY 2001 tax
returns identified with AEIC payments greater than $4,008 and requested the
original tax returns.
C. Obtained and reviewed 60 original tax returns and compared
the AEIC payment amount transcribed during processing to the amount shown on
the corresponding tax return and Wage and Tax Statement (Form W-2) for
accuracy, to determine the cause of any discrepancies.
II.
Determined the number of
taxpayers that had tax liabilities overstated due to incorrect AEIC payment
amounts captured during processing of TY 2000 and 2001 tax returns.
A.
Obtained TY 2000 and 2001
electronic records of tax returns processed by the IRS through December 2001
and 2002, respectively, from the RTF. Stratified the AEIC payments on these tax
returns by using the following maximum allowable Earned Income Tax Credit
(EITC) amounts applicable to the number of EITC-qualifying children the
taxpayer reported:
1.
No qualifying child and EITC
> $353 for TY 2000; > $364 for TY 2001.
2.
One qualifying child and EITC
> $2,355 for TY 2000; > $2,428 for TY 2001.
3.
More than 1 qualifying child
and EITC > $3,888 for TY 2000; > $4,008 for TY 2001.
4.
Any AEIC payment amount with
AEIC > $1,412 for TY 2000; > $1,457 for TY 2001.
B. Calculated the number of returns for each category and the total amount of AEIC payments that exceeded the allowable amount of the EITC for the particular category.
C. Analyzed TY 2001 electronic records for trends that
indicated the AEIC errors were widespread, based on the results of our review
of the 278 tax accounts in our sample in Step III. below.
III.
Determined what actions the
IRS took, if any, to resolve accounts where the incorrect amounts of AEIC
payments were processed. For the
initial 278 TY 2001 tax returns in Step I.B. above, analyzed the tax account
information requested and reviewed the related Integrated Data Retrieval
System tax account information to determine the number
of tax returns and related AEIC payment amounts for the following categories:
A. Proper adjustments were made to the taxpayer’s account to
correct the AEIC payment error.
B. Unresolved account was assigned to other post-processing
functions as the direct or indirect result of an incorrect AEIC payment amount.
C. Taxpayer’s account was in balance due status due to the AEIC payment error.
D. Taxpayer’s account was in fully paid status, and no action was taken to resolve the
error.
IV.
Using the RTF tax account
data for TY 2001, requested Master File tax account data and identified trends
indicating AEIC payment errors were widespread.
Appendix II
Major Contributors to This Report
Michael R. Phillips, Assistant Inspector
General for Audit (Wage and Investment Income Programs)
Gary L. Young, Acting Director
Patricia Lee, Audit Manager
Anthony Anneski, Acting Audit Manager
Lynn Faulkner, Senior Auditor
Jack Forbus, Senior Auditor
Alan
Lund, Senior Auditor
Jerome Antoine, Auditor
Jean Bell, Auditor
Andrea McDuffie, Auditor
Dorothy Richter, Computer Specialist
Jeffrey Williams, Computer Specialist
Appendix III
Commissioner N:C
Deputy Commissioner
for Services and Enforcement N:DC
Commissioner, Small Business/Self-Employed Division S
Deputy Commissioner, Small Business/Self-Employed
Division S
Deputy Commissioner, Wage and Investment Division W
Director, Compliance
W:CP
Director, Customer Account Services W:CAS
Director, Strategy and Finance W:S
Director, Submission Processing W:CAS:SP
Chief Counsel CC
National Taxpayer Advocate
TA
Director, Legislative Affairs CL:LA
Director, Office of
Program Evaluation and Risk Analysis
N:ADC:R:O
Office of Management Controls N:CFO:AR:M
Audit Liaisons:
Program/Process Assistant Coordinator, Wage and Investment Division W:HR
Chief, Customer Liaison
S:COM
Appendix IV
This appendix presents detailed
information on the measurable impact that our recommended corrective action
will have on tax administration. These
benefits will be incorporated into our Semiannual Report to the Congress.
Type and Value of Outcome
Measure:
·
Taxpayer Rights and
Entitlements – Actual; nearly $267,000 in tax that should be abated for 35
taxpayers due to the incorrect tax assessments caused by Advance Earned Income
Credit (AEIC) payment errors (see page 3).
Methodology Used to Measure the
Reported Benefit:
We obtained tax return data from the Tax Year (TY) 2000 and 2001 Return Transaction
Files (RTF) for the
approximately 297,000 TY 2000 and 2001 tax returns with AEIC payment amounts
captured by the Internal Revenue Service (IRS) during processing of the tax
returns. We analyzed the electronic
data and identified 65,000 tax returns with $26 million in AEIC payments and no
Earned Income Tax Credit (EITC). We
also identified a total of 278 tax returns with AEIC
payments greater than $4,008. We
researched various IRS computer systems for information on the tax accounts
that showed the taxpayers paid all or a portion of the erroneous tax
assessment, made arrangements to pay, or were placed in the collection
process. We identified 35 of the 278
tax accounts meeting these criteria. Information
on these accounts indicated that the tax collected or owed by the taxpayers
equaled or closely matched the AEIC payment amounts and that the payment
amounts were incorrect. We determined that these 35 accounts totaled nearly $267,000 in erroneous AEIC payments.
Type and Value of Outcome
Measure:
·
Taxpayer Rights and
Entitlements – Potential; approximately $26 million in tax, for 65,000
taxpayers, that may have been incorrectly assessed on AEIC payments the
taxpayers did not receive (see page 3).
Methodology Used to Measure the
Reported Benefit:
We obtained tax return data
from the TY 2000 and 2001 RTFs for the approximately 297,000
TY 2000 and 2001 tax returns with AEIC payment amounts captured during
processing of the tax returns. We
analyzed the electronic data and identified 65,000 tax returns with $26 million
in AEIC payments and no EITC. Based on
the inadequate IRS controls during processing to reasonably assure the AEIC
payment amounts were correct, the IRS is at risk of incorrectly assessing the
tax on the AEIC payments processed for these returns.
Type and Value of Outcome
Measure:
·
Reduction of Burden on
Taxpayers – Actual; 106 taxpayers affected (see page 3).
Methodology Used to Measure the
Reported Benefit:
For the 278 TY 2001 tax returns in our sample with AEIC
payments greater than $4,008, we researched the IRS’ computer systems for tax
account information showing tax adjustments to the accounts as a result of AEIC
payment errors. We identified 106 of
278 tax accounts where abatements of tax were made after taxpayers responded to
IRS notices of an increase in tax assessed due to errors in AEIC payment
amounts. The abatement equaled the AEIC
payment, or there was an indication on the account that the abatement included
the erroneous AEIC payment.
Appendix V
The response was removed due to its size. To see the complete response, please go to the Adobe PDF version of the report on the TIGTA Public Web Page.