|IRS may have paid billions in improper EITC payments|
The IRS' strategy for examining claims for the Earned Income Tax Credit (EITC) are falling short, with nearly one-fourth of payments estimated to be wrong last year and the IRS focusing its efforts disproportionately on some Southern states. A new TIGTA report said the IRS estimated that 23.5% ($16bn) of EITC payments were issued improperly in fiscal year 2020. While the EITC helps keep millions of families out of poverty every year, it also accounts for an estimated $27bn, or 11%, of the individual income underreporting tax gap and has made up nearly 31% of all IRS audits in the last 10 years. TIGTA’s analysis of the IRS’s examinations of EITC claims also showed that its audit selection process appeared to be disproportionate in a number of Southern states, with Mississippi, Louisiana, Alabama, Georgia, Tennessee, South Carolina, North Carolina, Texas and Arkansas ranking at the top.