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Policy: Budgets & Deficits

Report: Massive fraud still rampant in Earned Income Tax Credit program

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Politics,Beltway Confidential,Opinion,Byron York,Taxes,Treasury,IRS,Budgets and Deficits

The Treasury Department has released its latest report on the fight against widespread fraud in the Earned Income Tax Credit program. The problem is, fraud is still winning. And there's not even much of a fight.

"The Internal Revenue Service continues to make little progress in reducing improper payments of Earned Income Tax Credits," a press release from Treasury's inspector general for Tax Administration says. "The IRS estimates that 22 to 26 percent of EITC payments were issued improperly in Fiscal Year 2013. The dollar value of these improper payments was estimated to be between $13.3 billion and $15.6 billion."

The inspector general's use of the phrase "little progress" was too generous. In fact, EITC fraud in the latest period was unchanged from earlier years.

The new report found that the IRS is simply ignoring the requirements of a law called the Improper Payments Elimination and Recovery Act, signed by President Obama in 2010, which requires the IRS to set fraud-control targets and keep improper payments below ten percent of all Earned Income Tax Credit payouts. "The IRS continues to not provide all required IPERA information to the Department of the Treasury," the new report says. "... For the third consecutive year, the IRS did not publish annual reduction targets or report an improper payment rate of less than 10 percent for the EITC."

The amount of money involved is staggering: a minimum of $13.3 billion and a maximum of $15.6 billion — billion, not million — wasted in a single program in a single year. Last fall, the inspector general estimated that somewhere between $110 billion and $132 billion had been thrown away in improper Earned Income Tax Credit payments in the last decade. Now add somewhere around $15 billion more — with no indication the rate of fraud will be reduced anytime in the future.

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