Re­port re­veals bo­gus pay­outs to the poor cost bil­lions

The Washington Times Weekly - - National - BY STEPHEN DI­NAN

The IRS is still pay­ing more than $10 bil­lion a year in bo­gus pay­ments to the poor un­der the Earned In­come Tax Credit, the agency’s au­di­tor said in a new re­port re­leased last week that says about a quar­ter of all pay­ments are im­proper.

De­spite a 2010 law re­quir­ing agencies to crack down on im­proper pay­ments, the In­ter­nal Rev­enue Ser­vice is still deeply in ar­rears, the Trea­sury’s In­spec­tor Gen­eral for Tax Ad­min­is­tra­tion said.

In 2013, the agency paid out be­tween $13.3 bil­lion and $15.6 bil­lion in bad pay­ments, ac­count­ing for up to 26 per­cent of all Earned In­come Tax Credit pay­ments.

The credit is one of the govern­ment’s chief poverty-fight­ing pro­grams.

It is a re­fund­able tax credit paid to the work­ing poor, par­tic­u­larly those with chil­dren, as an in­cen­tive to keep them in the work­force.

But it’s also rife with il­le­git­i­mate claims — in­deed, it’s the IRS’s only pro­gram deemed “high-risk” by the Of­fice of Man­age­ment and Budget.

The IRS ac­knowl­edged it’s been slow to re­spond to the 2010 federal law re­quir­ing it to come up with a strat­egy to com­bat bad pay­ments, but said it is mak­ing progress in meet­ing White House guide­lines.

IRS of­fi­cials also dis­puted some of the way the in­spec­tor gen­eral cal­cu­lated the bo­gus pay­ments, say­ing that rather than be­ing counted as im­proper pay­ments, they should be con­sid­ered part of the “tax gap,” the amount that tax­pay­ers un­der­pay to the IRS.

A num­ber of bo­gus Earned In­come Tax Credit claims are sub­mit­ted by tax pre­par­ers on be­half of their clients.

The IRS had tried to come up with a li­cens­ing scheme to cut down on bad pay­ments, but federal courts struck that pro­gram down, leav­ing the agency strug­gling with ways to po­lice tax pre­par­ers.

The max­i­mum Earned In­come Tax Credit that a per­son or cou­ple could be el­i­gi­ble for in 2013 was slightly more than $6,000 for tax­pay­ers with more than two chil­dren.

Even as the IRS pays out bil­lions in bad claims, there are a large num­ber of tax­pay­ers who would prob­a­bly qual­ify for the credit, but who never claim it.

Ear­lier this year Congress’s chief taxwriter, House Ways and Means Chair­man Dave Camp, pro­posed a re­form that would change the Earned In­come Tax Credit into a re­fund of pay­roll taxes.

Mr. Camp, Michi­gan Repub­li­can, said it would cut down on fraud be­cause it would be easy to see how much a worker paid in pay­roll taxes, just by look­ing at his W-2 form.

AS­SO­CI­ATED PRESS

Rep. Dave Camp, Michi­gan Repub­li­can, has pro­posed a re­form that would change the Earned In­come Tax Credit into a re­fund of pay­roll taxes.

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