IRS Gave Out $12B in Improper Refunds Last Year

Earned Income Tax Credit is the culprit
By John Johnson,  Newser Staff
Posted Apr 24, 2013 1:39 PM CDT
Taxpayers search through tax forms at the Illinois Department of Revenue in Springfield in this file photo.   (AP Photo/Seth Perlman)

(Newser) – The Earned Income Tax Credit is that rare IRS feature popular with politicians, economists, and especially with the low-income families it helps, notes the Hill. No wonder: Turns out, the IRS is overly generous with the credit. An audit shows that it distributed between $11.6 billion and $13.6 billion in improper EITC refunds last year. That accounts for up to 25% of all such refunds.

And it's no fluke: That amount is actually a marked improvement from previous years, reports the Washington Post. One of the big problems apparently is that rules surrounding the credit are so confusing that even professional tax preparers get bamboozled. Nor does it help that families might be eligible one year but not the next. Whatever the causes, the IRS is in violation of a 2010 law requiring that improper payments be reduced to a rate of 10% or lower. The agency says it's working on it. (Read more IRS stories.)

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