Treasury
Inspector General for Tax Administration
Office of Audit
THE INTERNAL REVENUE SERVICE IS NOT
IN COMPLIANCE WITH ALL IMPROPER PAYMENTS ELIMINATION AND RECOVERY ACT
REQUIREMENTS
Issued on March 2, 2012
Highlights
Highlights of Report Number: 2012-40-028 to the Internal Revenue Service Chief
Financial Officer.
IMPACT ON TAXPAYERS
The Improper Payments
Elimination and Recovery Act of 2010 increased agency accountability for
reducing improper payments in Federal programs.
The only program the IRS has identified for improper payment reporting
is the Earned Income Tax Credit (EITC) Program.
The IRS
estimates that 21 to 26 percent of EITC payments were issued improperly in
Fiscal Year 2011. This equates to
$13.7 to $16.7 billion in EITC improper payments.
WHY TIGTA DID THE AUDIT
This audit was
initiated because the Improper Payments Elimination and Recovery Act of 2010 requires the TIGTA to assess the IRS’s compliance with
improper payment requirements. The
objective of this review was to assess the IRS’s compliance with the Improper
Payments Elimination and Recovery Act of 2010.
The scope of this
review was limited to an assessment of EITC information the IRS provided for
inclusion in the Department of the
Treasury Agency Financial Report Fiscal Year 2011.
WHAT TIGTA FOUND
The methodology the IRS uses to estimate the EITC
improper payment rate results in a reasonable estimate of EITC overclaims. However, the IRS did not comply with all of
the improper payment requirements included in the Improper Payments Elimination
and Recovery Act.
The Department of the Treasury identifies the programs
for which the IRS must assess the risk of improper payments. The IRS
compiles the required information and forwards it to the Department of the
Treasury for inclusion in the Department’s agency financial report.
Our analysis of the information the IRS provided to
the Department of the Treasury showed that the IRS is not in compliance with
all Improper Payments Elimination and Recovery Act requirements. The IRS has not established annual EITC
improper payment reduction targets and has not computed a gross estimate of
EITC improper payments as the estimate does not include underpayments. An underpayment results when an EITC payment
is made in an amount less than what an individual is entitled to receive.
The IRS has plans in place
to establish EITC reduction targets and is exploring the feasibility of
computing an improper payment estimate for EITC underpayments.
WHAT TIGTA RECOMMENDED
TIGTA made no recommendations in this report.
READ THE
FULL REPORT
To view the report,
including the scope, methodology, and full IRS response, go
to:
http://www.treas.gov/tigta/auditreports/2012reports/201240028fr.html.
E-mail Address: TIGTACommunications@tigta.treas.gov
Phone
Number: 202-622-6500
Website: http://www.tigta.gov