The Internal Revenue Service Building in Washington, DC (AFP Photo / Win McNamee)
The Internal Revenue Service has a hard time making friends, largely on account of it being the federal agency that collects trillions of dollars in taxes from Americans every year. But for a select few, the IRS has been nothing but generous as of late.
Perhaps too generous, in fact: According to the results of a government-issued audit released this week by the Treasury Department, IRS officials have erroneously handed out over $110 billion in tax credit to undeserving recipients during the last decade.
The report — accurately titled “The Internal Revenue Service is not in Compliance with Executive Order 13520 to Reduce Improper Payments” — was completed in late August but only uncovered this week.
In that audit, Treasury officials admit that the IRS has continuously ignored warnings to abide by a 2009 executive order which mandates the agency stop handing out improper Earned Income Tax Credit (EITC) payments: refundable credits given out by the government to low- and medium-income individuals and families.
President Barack Obama signed Executive Order 13520 four years ago “in the interest of reducing payment errors and eliminating waste, fraud and abuse,” and in doing so ordered the IRS to make sure more Americans were aware of the program while also cracking down on bogus payments. Years later though, the new report indicates that Uncle Sam is wasting billions of dollars annually by handing out money to American taxpayers not entirely deserving of a few extra dollars.
According to the report, 21 to 25 percent of the ETIC payments made during the last fiscal year were done so in error. Thiis translates to roughly $13.6 billion in bogus claims under the EITC program in just FY2012, and as much as ten times that — or $132.6 billion — during the last decade, including in years when a massive recession ravaged the American economy and congressional leaders scrambled time and time again to increase the country’s borrowing limit.
“The IRS must do a better job of reining in improper payments in this and in other programs,” J. Russell George, the agency’s inspector general, said in the report.
In response, the IRS said it “appreciates the inspector general’s acknowledgement of all our work to implement processes that identify and prevent improper EITC payments.”
The IRS claims on its part that it protected approximately $4 billion in erroneous EITC payments from being handed out during the last fiscal year, but opponents are quick to criticize the $100-billion-plus that was improperly given away during the last 10 years.
“Although significant amounts are being protected, the IRS has made little improvement in reducing improper EITC payments as a whole since it has been required to report estimates of these payments to Congress,” the audit reads.
The report is quickly making waves in Washington, and Sen. Tom Coburn (R-Oklahoma) issued a statement saying, “The waste outlined in this report — more than $13 billion a year — equals or exceeds the annual budgets of some federal agencies.” Indeed, the $13 billion wasted during just the last fiscal year exceeds the entire operating budget of both the Environmental Protection Agency and the Department of Labor.
“Before we ask taxpayers to send even more of their own money to Washington, we must do more to prevent these egregious examples of waste,” said Sen. Coburn.
“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,” Sen. Orin Hatch (R-Utah), the leading Republican on the Senate Finance Committee, added in response to the report.