The Internal Revenue Service’s program that administers Individual Taxpayer Identification Numbers paid almost $10.9 million in erroneous retroactive tax credits to individuals whose TIN was not issued on or before the return due date, a new audit found.
There were 5,534 tax returns for which the IRS paid the almost $10.9 million in erroneous tax credits, according to a December audit from the Treasury Inspector General For Tax Administration, a finding that comes after years of warning about the use of Certifying Acceptance Agents.
The IG explained that Certifying Acceptance Agents or CAAs, help TIN applicants authenticate their identifying documents before submitting their application to the IRS.
Since 2018, the IG “has repeatedly raised concerns related to the use of CAA, including that the IRS has not effectively ensured that compliance reviews were completed on those CAAs that presented the highest risk to the ITIN Program,” the audit found.
In 2020, it reported that for FY 2016-FY 2019, the IRS completed an average of over 300 reviews per fiscal year. In FY 2022, the IRS completed only 25 compliance reviews of domestic-based CAAs and didn’t do any compliance reviews during FY 2023.
What’s more, the IG audit found 2,519 tax returns with refundable and nonrefundable credit claims for $4.7 million that were incorrectly disallowed when the TINs were issued on time. With the $10.9 million erroneous tax credits paid, the $4.7 million in incorrectly denied claims brings the IRS overpayment to $6.2 million.
The IG recommended that the IRS review the 5,534 tax returns for which the IRS incorrectly paid retroactive credit claims and the 2,519 tax returns for which the IRS incorrectly denied retroactive credit claims “and ensure that erroneous funds are recovered and that taxpayers receive the benefits to which they are entitled.”
The #WasteOfTheDay is brought to you by the forensic auditors at OpenTheBooks.com
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