Treasury Inspector General for Tax Administration
February 28, 2013
TIGTA - 2013-06
Contact: David Barnes
WASHINGTON – The process used by the Internal Revenue Service (IRS) to assess the risk of improper payments in its revenue program funds does not provide a reliable assessment of the risk of improper payments, according to a study released today by the Treasury Inspector General for Tax Administration (TIGTA).
Improper payments cost taxpayers billions of dollars annually across Federal programs. The Improper Payments Elimination and Recovery Act of 2010 (IPERA) requires Federal agencies to estimate improper payments for all programs in which such payments are significant. The first step is for agencies to conduct an assessment of their risk for significant improper payments.
TIGTA’s audit concluded that the risk assessment process resulted in a reasonable assessment of the risk of improper payments for IRS administrative programs. However, the results of the risk assessment may not accurately reflect the risk of improper payments in the IRS’s revenue program funds. TIGTA’s audit found that the IRS’s risk assessment:
The IRS determined that only the Earned Income Tax Credit Program was at high risk for improper payments; all other programs were rated low risk. However, prior TIGTA reports indicate otherwise.
In September 2011, TIGTA reported that the IRS may have erroneously allowed approximately $3.2 billion in American Opportunity Tax Credits. In 2012, TIGTA reported that the Individual Taxpayer Identification Number (ITIN) Program is so deficient that there is no assurance that ITINs are not being assigned to individuals submitting questionable applications. In 2011, the IRS processed claims by filers using an ITIN totaling $4.2 billion for the refundable credit known as the Additional Child Tax Credit. Another 2012 TIGTA audit found that the IRS may have paid $5.2 billion in potentially fraudulent tax refunds due to identity theft. The IRS had not assessed the risk of improper payments in this area at all.
“In these difficult economic times, all efforts must be made to prevent improper payments in every program. Ineffective risk assessment processes can limit the Government’s ability to protect taxpayer dollars from waste, fraud, and abuse,” said J. Russell George, Treasury Inspector General for Tax Administration.
TIGTA made two recommendations for improvement. The IRS agreed with TIGTA’s recommendations and plans to take the suggested corrective actions.
Read the report.
Note: The difference between the date TIGTA issues an audit report to the Internal Revenue Service and the date TIGTA publicly releases the report is due to TIGTA's internal review process to ensure that public release is in compliance with Federal confidentiality laws.
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