Three Republican lawmakers are calling on the Social Security Administration to work with the Internal Revenue Service to do more to stop fraudulent claims for the Earned Income Tax Credit, particularly by the self-employed.

House Ways and Means Human Resources Subcommittee chairman Charles Boustany, R-La., Social Security Subcommittee chairman Sam Johnson, R-Texas, and Oversight Subcommittee chairman Peter Roskam, R-Ill., pointed Friday to a recent report by the Social Security Inspector General showing the SSA failed to report suspicious self-employment income to the IRS, permitting tens of thousands of individuals to illegally obtain EITC payments they did not deserve.

The lawmakers acknowledged that the Earned Income Tax Credit is an important tool to help people move from welfare to work, but said it must be protected from fraud. The Inspector General found that when the SSA asked individuals about their earnings—which could make them ineligible for payments under the Supplemental Security Income program—thousands of individuals disclaimed those earnings.

Over the course of four years, the IG found that nearly 50,000 individuals reported—but later disclaimed—$742 million in self-employment earnings on their tax returns that had previously made them eligible for the EITC or other payments. In over half of these cases, involving $399 million in self-employment earnings, SSA failed to report the disclaimed earnings to the IRS, effectively preventing the IRS from investigating or recovering EITC mispayments averaging $4,053.

Boustany, Johnson and Roskam urged the SSA to take corrective action immediately and work with the IRS to eliminate EITC self-employment fraud. They said the SSA and the IRS need to develop the electronic reporting system that the SSA claimed it was developing seven years ago when the Inspector General initially reported the possibility of fraudulent self-employment income earnings.

“In an era of innovation, it is unacceptable that our federal welfare system allows applicants to claim earnings when applying for one government benefit while denying those same earnings to apply for another,” Boustany said in a statement. “Government agencies like the Social Security Administration must be held to a higher technological standard to put a stop to the millions of taxpayer dollars that are wasted on this practice each year.”

Treasury Secretary Jacob Lew acknowledged the significant amount of fraud in the EITC program, stating in testimony before the Ways and Means Committee on Tuesday that “compliance needs to be improved.”

The lawmakers noted that this is not the first time the Social Security Administration’s Inspector General directed the agency to report potentially falsified earnings to the IRS. In 2007, Inspector General Pat O’Carroll alerted the SSA about the issue of fabricated self-employment income submitted on tax returns and to the SSA. The IG urged the two agencies to install an electronic reporting process enabling SSA to forward questionable SEI to the IRS for investigation.

But eight years later, SSA has no electronic system and has failed to report half of the suspicious earnings.

Another IG who is responsible for inspecting the IRS, the Treasury Inspector General for Tax Administration, has estimated that erroneous EITC claims have cost American taxpayers as much as $132 billion over 10 years, with an error rate of roughly 24 percent (see IRS Made Errors on 24% of EITC Payments).

At another congressional hearing this week on IRS operations before the House Ways and Means Committee, several lawmakers and IRS commissioner John Koskinen defended the EITC program, pointing out that many of the improper payments for the EITC and the Additional Child Tax Credit were not due to fraud but could be attributed to factors such as different separated parents claiming children as dependents on their tax returns or errors in figuring the refundable tax credits.

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