Reports

Treasury Inspector General for Tax Administration

Processing of Recovery Rebate Credit Claims During the 2022 Filing Season

Audit | 8/24/2023

1 - Open

On March 14, 2022, we notified the Director, Submission Processing, Wage and Investment Division, of our concerns regarding the accuracy of COVID Tax Tip 2022-29 regarding Internal Revenue Code §§ 6428B(f) and 6428B(h). Specifically, the guidance states incorrectly that taxpayers can claim the RRC for a shared dependent even if the IRS has already made an advance payment for the dependent. We recommended that the IRS revise the Tax Tip and related Frequently Asked Questions, etc., to state that taxpayers who share qualifying dependents are required to reduce the amount of the RRC claimed by the advance payment issued to either parent on behalf of the dependent.

2 - Open

The Commissioner, Wage and Investment Division, should review the 274,865 individuals identified where the IRS issued an RRC to potentially ineligible dependents and nonresidents and take the actions needed to recover payments that are determined to be erroneous.

3 - Open

Continue to periodically issue information on the availability of the RRC and how to claim it through Frequently Asked Questions on IRS.gov, communications with tax return preparers, annual unclaimed refund announcements, etc. until the statutory period for taxpayers to file a Tax Year 2020 and 2021 tax return to claim the RRC has expired.

4 - Open

Send a letter to the nearly 3 million individuals we identified where the tax return data show the individual is potentially eligible for the RRC encouraging the individuals to amend their Tax Year 2021 return and claim the credit if eligible. The letter should clearly state the eligibility requirements for claiming the RRC in simple terms and direct the individuals to additional resources if needed to assist them in determining whether they are eligible.

Treasury Inspector General for Tax Administration

American Rescue Plan Act: Assessment of the Expanded Child and Dependent Care and Earned Income Tax Credits

Full Details: Oversight.gov Report Page

Audit | 6/15/2023

1 - Open

On February 17, 2022, we notified the Director, Submission Processing, Wage and Investment Division, of our concern with three business rules and recommended that IRS management update the business rule programming to identify and evaluate returns for both refundable and nonrefundable CDCC claims.

2 - Open

Ensure that programming is updated for Processing Year 2023 to identify taxpayers who reported an obviously invalid care provider TIN on Form 2441.

3 - Closed

Develop a tool or programming for Error Resolution to ensure that tax returns claiming prior year expenses are systemically identified to determine if the maximum CDCC had been claimed in the prior year, before processing the return and potentially releasing erroneous refunds.

4 - Open

Work with the Department of the Treasury, Office of Tax Policy, to advance legislation to treat a tax return as filed only when it is accepted. This would remove the legal risks associated with rejecting tax returns with conditions that indicate the taxpayer is ineligible for refundable credits claimed on the return.

5 - Closed

If legislation is enacted, develop programming to reject e-filed returns meeting certain conditions, such as those noted in this report.

6 - Open

The Commissioner, Wage and Investment Division, should ensure that the compliance filter criteria for identifying individuals claiming self-only EITC who are not eligible for work is updated to include the *************************.

7 - Open

The Commissioner, Wage and Investment Division, should establish processes to compare subsequent legislative changes with compliance filter
programming to identify and make necessary changes, as needed.

8 - Closed

The Commissioner, Wage and Investment Division, should review the 774,559 returns with self-only EITC from potentially ineligible ******** and take actions needed to recover credits that are determined to be erroneous.

9 - Open

The Commissioner, Wage and Investment Division, should complete examinations for all 61 tax returns we identified to ensure taxpayers receive the correct CDCC amounts.

Treasury Inspector General for Tax Administration

American Rescue Plan Act: Review of the Reconciliation of the Child Tax Credit

Full Details: Oversight.gov Report Page

Audit | 6/14/2023

1 - Open

Review all of the 6,833 taxpayers with excess Child Tax Credit identified during our review and take appropriate actions to ensure that the taxpayers receive the correct amount of the Child Tax Credit.

2 - Closed

Identify additional taxpayers after May 5, 2022, who received excess Child Tax Credit as a result of tax examiner error and take appropriate actions to ensure that these taxpayers receive the correct amount of the Child Tax Credit.

3 - Open

Review the 105 taxpayers who potentially did not receive all of their eligible Child Tax Credit identified during our review and take appropriate actions to ensure that they receive the correct amount of the Child Tax Credit.

4 - Open

Evaluate the priority of programming to ensure that processes and procedures are developed to identify and correct tax examiner entries input during the error correction process that exceed statutory limits, including a process to systemically reprocess corrected returns through Error Resolution programming before being released for processing.

5 - Closed

On February 17, 2022, we notified IRS management of our concerns with undeliverable payments that post after the processing of the tax return. In these instances, the IRS processed the tax return as if the payment was received by the taxpayer. As a result, the taxpayer would receive less Child Tax Credit than they are eligible to receive. We recommended that the IRS develop a process to identify undeliverable payments after
processing of the TY 2021 tax return.

6 - Closed

Identify taxpayers with advance payments who have yet to file a TY 2021 tax return and send a reminder notice, similar to the Department of the Treasury, using the advance payments as part of the criteria.

7 - Closed

Work with the Commissioner, Small Business/Self-Employed Division, to create a process to recover potentially erroneous advance payments from taxpayers who have not filed a TY 2021 tax return.

Treasury Inspector General for Tax Administration

American Rescue Plan Act: Continued Review of Premium Tax Credit Provisions

Full Details: Oversight.gov Report Page

Audit | 6/14/2023

1 - Open

The Commissioner, Wage and Investment Division, and the Commissioner, Small Business/Self-Employed Division, should consider expanding the use of soft notices to address potentially erroneous PTC claims. These notices should provide individuals with information specific to the eligibility or reporting requirements related to the potential error the IRS identified and suggest the filing of an amended return, if an error has
occurred.

2 - Closed

The Commissioner, Wage and Investment Division, should notify the 317,418 taxpayers we identified, who potentially received less PTC than they were entitled or repaid more APTC than required, that they may qualify for additional PTC or overpaid APTC and encourage them to file an amended Tax Year 2021 return, if applicable.

3 - Closed

The Commissioner, Wage and Investment Division, should develop processes, such as the use of courtesy letters to notify individuals of their potential eligibility, to proactively assist taxpayers who, based on available tax return and Exchange data, potentially claimed less PTC than entitled or paid more APTC than required.

4 - Open

On October 26, 2022, we notified the Director, Submission Processing, of our concerns regarding taxpayers who are potentially eligible for additional PTC based on their unemployment status during Tax Year 2021. We recommended that the Director, Submission Processing, notify these taxpayers that they may qualify for additional PTC or be able to reduce the amount of excess APTC they must repay and encourage them to file an amended Tax Year 2021 return, if they qualify.

5 - Open

On October 25, 2022, we notified the Director, Submission Processing, of our concerns with the draft Tax Year 2022 Form 8962 instructions. We
recommended that the IRS revise the instructions to inform taxpayers that they have an option to set a domestic violence indicator on their tax return.

Treasury Inspector General for Tax Administration

Recurring Identification Is Needed to Ensure That Employers Full Pay the Deferred Social Security Tax

Full Details: Oversight.gov Report Page

Audit | 5/22/2023

Treasury Inspector General for Tax Administration

Additional Actions Are Needed to Reduce Accounts Management Function Inventories to Below Pre‑Pandemic Levels

Full Details: Oversight.gov Report Page

Audit | 5/10/2023

1 - Closed

Ensure that all sites understand and begin immediately stamping the ICT received date after correspondence screening is completed, and that individual and business documents are screened with equal importance.

10 - Open

Coordinate with the Information Technology organization to explore adding Taxpayer Relations inventories into the CII, so that all Accounts Management inventory is located in the same inventory management system.

11 - Closed

The Commissioner, Wage and Investment Division, should establish time frames for and a process to measure correspondence screening timeliness at each site.

12 - Closed

The Commissioner, Wage and Investment Division, should rescind the requirement that only the TEs and the CSRs perform correspondence
screening and encourage all sites to use mail clerks, after providing them with adequate training.

13 - Open

The Commissioner, Wage and Investment Division, should ensure prompt completion of the ICT review to determine if additional scanners will be
purchased.

2 - Closed

Discontinue correspondence screening via telework and ensure at all sites that screening must be conducted in the same IRS facility where documents are being scanned by the ICT.

3 - Closed

Identify and address the cause of Accounts Management function employees incorrectly routing cases to other IRS functions and work with other IRS functions to update their Internal Revenue Manuals to make it clear that incorrectly routed documents should be returned to the
originating employee.

4 - Closed

We recommended that management take steps to hire as many mail clerks as possible.

5 - Closed

The Commissioner, Wage and Investment Division, should establish goals for each of the Accounts Management function’s inventory types and develop a plan for addressing those goals to ensure a timely return to pre-pandemic inventory levels.

6 - Open

The Commissioner, Wage and Investment, should prioritize funding and implementation of automated processing of Forms 1040-X to increase efficiencies and reduce taxpayer burden.

7 - Open

The Commissioner, Wage and Investment Division, should implement temporary solutions for the processing of Forms 1040-X to reduce the backlogs, reduce taxpayer burden, and save IRS resources until an automated solution is implemented.

8 - Open

Coordinate with the Information Technology organization to prevent generating transcripts for manual refunds less than $100 and adjust the frequency that some transcripts are generated to help management get through the inventory more efficiently.

9 - Open

Temporarily relieve employees in the Accounts Management function from having to complete paperwork for barred statutes, so they can focus on eliminating the backlogged inventory and prevent future barred statutes.

Treasury Inspector General for Tax Administration

Destruction of Paper-Filed Information Returns

TIGTA is initiating a review to evaluate the IRS's destruction of unprocessed Tax Year 2019 paper-filed information returns. The overall objective of this audit is to assess the actions taken to mitigate the risk to the IRS and taxpayers associated with the approximately 30 million unprocessed non-ACA information returns destroyed in March 2021. TIGTA will determine if: (1) the IRS evaluated alternatives to destroying unprocessed Tax Year 2019 information returns and whether the classification of these returns as classified waste is consistent with applicable laws, regulations, and policies; (2) followed classified waste processes for the 30 million unprocessed paper-filed information returns that were destroyed; and, (3) assessed and quantified the impact of the destruction of the 30 million paper-filed information returns on taxpayers and its compliance programs.

Treasury Inspector General for Tax Administration

Date Range

Report Type

Report Category

Submitting Agency

State/Local Agency

State (State and Local Reports)

Fraud Type

Agency Reviewed

Related Organizations

Management Challenges

Any Recommendations

Any Open Recommendations

Reports

Processing of Recovery Rebate Credit Claims During the 2022 Filing Season

American Rescue Plan Act: Assessment of the Expanded Child and Dependent Care and Earned Income Tax Credits

American Rescue Plan Act: Review of the Reconciliation of the Child Tax Credit

American Rescue Plan Act: Continued Review of Premium Tax Credit Provisions

Recurring Identification Is Needed to Ensure That Employers Full Pay the Deferred Social Security Tax

Additional Actions Are Needed to Reduce Accounts Management Function Inventories to Below Pre‑Pandemic Levels

Destruction of Paper-Filed Information Returns

Backlogs of Tax Returns and Other Account Work Will Continue Into the 2023 Filing Season

Reporting on the Use of Coronavirus Response Funding Could Be Enhanced

Reporting on the Use of Coronavirus Response Funding Could Be Enhanced

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