Millions of dollars in erroneous refundable tax credits may never be recovered by the Internal Revenue Service, but the IRS plans to clamp down on claims for such tax breaks and the Earned Income Tax Credit heads the list.
A report released in late October 2012 by the Treasury Inspector General for Tax Administration (TIGTA, aka the CIA and FBI of tax administration) on refundable tax credits – such as the EITC, the Additional Child Tax Credit, and the First-Time Homebuyer Credit – found that they are highly vulnerable to fraud.
TIGTA, the big boys, initiated the audit to determine the effectiveness of efforts by the IRS to recover refundable credits disallowed during post-refund examinations and to consider options for the IRS to implement to decrease the issuance of erroneous refundable credits.
So what does that say to the taxpaying public who are entitled to these refunds and credits? You had better come correct.
TIGTA advises the IRS, and is not subject to their guidelines. TIGTA recommended that the IRS identify and stop erroneous claims for refundable credits before refunds are issued, including implementing an account indicator to identify taxpayers who claim erroneous refundable credits to prevent them from erroneously receiving those claims for a specific period in the future.
TIGTA summarily states to the IRS: as far as refundable credits are concerned, no more Mr. Nice Guy. Do not pay and then have to pay to get the erroneous refund back, advises TIGTA; simply