The IRS correctly calculated taxpayer eligibility for a clawback rebate credit during the 2021 filing season 99.3% of the time, the Treasury Inspector General for Tax Administration (TIGTA) reported Monday. .

However, even the corresponding error rate of 0.7% involved hundreds of millions of dollars in improper credit allocations, and TIGTA found other instances where individuals should have received recovery rebate credit or higher amount, but did not.

The report, Processing Salvage Rebate Credit Requests During the 2021 Filing Season (#2022-46-032), dated May 19, analyzed the reasons for the errors, which were both systemic and manual, and made 22 recommendations, including 12 with which the IRS was not in agreement. deal. Some recommendations accepted by the Service were issued as Service Alerts during the TIGTA study, some of which resulted in treatment changes during the filing season.

Achieving a 99.3% accuracy rate was “no small feat,” said Kenneth Corbin, IRS Commissioner, Division of Wages and Investments, in the memo providing the management response to the IRS to the draft report. As TIGTA also noted, 26.3 million tax returns claimed recapture rebate credits for 2020 totaling $39.2 billion, as of May 27, 2021.

The Recovery Reimbursement Credit, a provision of the Coronavirus Aid, Relief, and Economic Security Act, PL 116-136, provided a refundable credit of up to $1,200 per eligible adult and $500 per eligible child, applied to the year 2020 tax credit. It was extended and amended by the Consolidated Appropriations Act, 2021, PL 116-260, including an additional salvage rebate credit for 2020 of up to $600 per eligible adult and $600 per eligible child.

Both parts of the recovery rebate credit were paid in advance to eligible taxpayers in the form of economic impact payments (EIPs), so the recovery rebate credit was generally only available to taxpayers who had not received either or both EIPs or their full eligible amounts, but had been eligible for them. The first set of EIPs have been issued to nearly 162 million people and the second to 146.5 million people, for a combined total amount of nearly $413 billion as of February 4, 2021.

Although the recovery refund credit error rate is low, TIGTA found that more than 355,000 people received recovery refund credits totaling $603 million for which they may not have been eligible either. because they were listed as a dependent on another tax return, or because the amount was based incorrectly. on a dependent who was claimed on another return or for whom an EIP was paid. Some other ineligible applicants were non-resident aliens or residents of US territories.

TIGTA determined that out of 181,743 returns, the IRS miscalculated the amount of the salvage rebate credit, including 117,314 returns where the calculated salvage rebate credits were $218.7 million more than what the taxpayers were entitled to, and 64,429 other returns where the recovery rebate credit was a total of $80 million less than what the taxpayers should have received. The majority of these errors, 167,130, were made by tax auditors trying to correct a discrepancy between the amount claimed and the eligible amount of the refund credit for recovery. Another 11,797 returns reflected an IRS programming error in calculating a recapture refund credit for taxpayers claiming under the separate filing status of married.

More than 11.2 million returns required an EIP refund/recovery credit discrepancy to be resolved, including 5.6 million manually, TIGTA reported. In addition to risking additional errors, manual corrections created lengthy delays, TIGTA said. More than 500,000 such declarations were still being processed as of September 2, 2021.

Fraud filters generally worked as expected, TIGTA reported, although a programming error prevented 7,478 returns with potentially erroneous recovery rebate credits totaling $29.4 million from being flagged for review. additional charge before salvage rebate credits are paid.

When the IRS disagreed with TIGTA’s recommendations, the Service generally cited the relatively small number of taxpayers involved and other priorities competing for its limited resources. Although TIGTA recommended that the IRS review returns that claimed both an EIP and a recovery rebate credit for the same eligible child or a recovery rebate credit for an individual claimed as a dependent on another return , the IRS responded that returns are subject to screening for review.

With respect to approximately 10 million taxpayers who appeared to have been eligible to claim a recovery rebate credit but did not, the IRS declined to take the initiative to issue one to them unilaterally, noting that ” taxpayers are not required to claim the credit [recovery rebate credit]and that the IRS had “widely communicated the need to file the 2020 tax year income tax return to claim the credit based on the household’s current circumstances.”

TIGTA faulted this response for being inconsistent with the IRS’ automatic adjustments for excluding gross income up to $10,200 in unemployment benefits under the American Rescue Plan Act, PL 117 -2, adding that “it is unrealistic for IRS management to assume that advance communications from the IRS are sufficient to ensure that all persons, including those who do not normally file tax returns , understand if they are eligible for the [recovery rebate credit] and how to claim it.”

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