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  • A report by the Treasury Inspector General for Tax Administration says More IRS Action Sought On Improper Tax Credit Payments

    The United States Internal Revenue Service (IRS) is required by law to take action in federal programs identified as being at high risk of improper payments, and it needs to classify the Additional Child Tax Credit (ACTC) as such a program, according to a recent report by the Treasury Inspector General for Tax Administration (TIGTA).Under the Improper Payments Elimination and Recovery Act of 2010, a program is defined as having significant improper payments when they exceed both 2.5 percent of program outlays and USD10m of all program payments made during the fiscal year.

    However, while the IRS has developed processes to identify improper Earned Income Tax Credit (EITC) payments and their root causes, estimating that 24 percent of all EITC payments made in the 2013 fiscal year, or USD14.5bn, were paid in error, it has not classified the ACTC as at high risk, even though TIGTA has estimated the potential ACTC improper payment rate for 2013 was up to 30.5 percent. Potential ACTC improper payments could then have totaled up to USD7.1bn.TIGTA pointed out that the EITC and ACTC are both refundable credits designed to help low-income individuals reduce their tax burden, and IRS enforcement data show that the root causes of improper ACTC payments are similar to those of the EITC.

    The overall objective of TIGTA’s review was to assess the IRS’s efforts to identify and address the root causes of erroneous EITC and ACTC payments and it found that significant changes in IRS compliance processes would still be necessary to make any significant reduction in improper payments.


  • House Passes One-Year US Tax Extenders Renewal

    The United States House of Representatives has passed, by a bipartisan vote of 378-46, a Bill that approves a one-year renewal for the “tax extenders.” Following the failure of other more selective and longer-term proposals, the Tax Increase Prevention Act of 2014 takes in all of the 50-plus tax provisions for individuals and businesses that expired at the end of 2013 and extends them until the end of this year. They will therefore need to be revisited by the next Republican-led Congress sometime in 2015.

    Renewal of the measures will, however, mean greater certainty for those individual and business taxpayers who are affected by the expired provisions, and also reduce operational and compliance risks that could have delayed the tax filing season and the processing of taxpayer refunds.


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