IRS Hands Companies $3 Billion in Tax Credits They Didn’t Deserve

Government reports make clear that big changes are needed at the tax agency.
Katie Kuehner-HebertApril 24, 2015
IRS Hands Companies $3 Billion in Tax Credits They Didn’t Deserve

The Internal Revenue Service gave $3 billion of erroneous business tax credits to companies that did not qualify for them, according to a report by The Treasury Inspector General for Tax Administration, posted by Forbes Friday.

Tax Inspector Logo.svgThe tax credits were claimed on more than 3,000 electronically filed corporate tax returns in 2013 for such activities as providing childcare for employees’ children, the report said. In some cases the credits had expired but were claimed anyway, and in others, the IRS failed to catch the erroneous credits and so allowed them despite the mistakes, Forbes reported.

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“Given the amount of potential tax revenue at risk, it is imperative that the IRS improve its processes to ensure that corporations accurately claim carry-forward general business credits,” Inspector General J. Russell George said in the report.

The IRS also paid out $5.8 billion in refunds that it later realized were fraudulent.

The IRS is “wracked” by $346 million in budget cuts for 2015, magnified during tax season as it grapples with the usual issues relating to seasonal employees as well as technical problems, according to Forbes.

“This year, it was made far worse by the enormous additional burdens of implementing Obamacare, coupled with a sharp uptick in identity fraud filing problems,” Forbes wrote. “It’s not a pretty picture. Government reports make clear that change is needed.”

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