The Internal Revenue Service correctly calculated the recovery rebate credit on the vast majority of tax returns it processed this year, but it still missed out on tens of millions of dollars.
The Treasury Inspector General for Tax Administration found in a new report that the IRS correctly calculated the credit on 99.6 percent of the tax returns it processed through April 17, 2009, and issued approximately $8.5 billion in recovery rebate credits to almost 21 million taxpayers. However, TIGTA also identified 258,550 taxpayers who did not receive payments totaling $84.6 million to which they were entitled and 140,549 taxpayers who received a total of $60.6 million to which they were not entitled.
The recovery rebate credit, established by the Economic Stimulus Act of 2008, goes to individuals who may not have received an economic stimulus payment in 2008 or who may be entitled to an additional credit. During its audit, TIGTA notified the IRS of a programming error that could have allowed almost 6.4 million taxpayers to receive approximately $1.6 billion in recovery rebate credits to which they were not entitled.
The Economic Stimulus Act of 2008 specifically prohibits a taxpayer who can be claimed as a dependent on someone elses return from receiving the credit. However, initial programming for the recovery rebate credit did not disallow the credit when a taxpayer indicated he or she could be claimed as a dependent on someone elses return. The IRS has since corrected this error.
Furthermore, the IRS erroneously provided more than $27 million in recovery rebate credits to more than 44,000 taxpayers who did not have valid Social Security numbers.
Overall the IRS successfully implemented the recovery rebate credit and provided billions of dollars to millions of Americans as Congress intended, said TIGTA Inspector General J. Russell George in a statement. However, taxpayer confusion in calculating the recovery rebate credit and programming errors presented significant challenges.
TIGTA recommended that the IRS issue recovery payments to individuals who did not receive the rebate credit to which they were entitled. The IRS is currently reviewing the data provided by TIGTA and plans to provide taxpayer assistance, if warranted.
Register or login for access to this item and much more
All Accounting Today content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access