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Hatch Criticizes IRS for Improper EITC Payments, Fears Same in Health Care Bill

Senate Finance Committee ranking member Orrin G. Hatch, R-Utah, called on the IRS to take stronger steps to curb improper Earned Income Tax Credit (EITC) payments after the Inspector General for Tax Administration (TIGTA) released a report on October 22 saying the IRS has “made no significant improvement” in reducing the overpayments (TAXDAY, 2013/10/23, T.1).

The IRS estimates that 21 to 25 percent ($11.6 billion to $13.6 billion) of EITC payments were issued improperly during fiscal year (FY) 2012. However, TIGTA found that the IRS’s FY 2012 estimate for EITC claims and improper payments are understated because the laws extending increases in the EITC were not factored into the estimates. TIGTA also found that the IRS has not established annual improper payment reduction targets as required by law, nor was it in compliance with the quarterly reporting requirement for high-dollar improper EITC payments (payments totaling more than $5,000) to TIGTA and the Council of the Inspectors General for Integrity and Efficiency.

Hatch, who has long warned that improper EITC payments could lead to as much as $250 billion in overpayments over 10 years, said the problem could re-appear in Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148) subsidies. “Refundable tax credits are a nightmare to administer and lead to far too much of the American people’s money going out to those who aren’t eligible,” said Hatch in a statement. “That the IRS can’t figure out how to rein in the improper Earned Income Tax Credit payments doesn’t bode well for the $1.1 trillion in Obamacare subsidies.”

Hatch said the IRS and the Obama administration must “aggressively crack down” on the erroneous payments or the Treasury Department could stand to lose nearly $250 billion in Obamacare subsidies, on top of approximately $136 billion in erroneous EITC payments. The EITC is a refundable tax credit, which amounts to a subsidy given out by the IRS through the tax code instead of a direct payment from the government. The credit is similar to the advanced and refundable premium tax credits, or subsidies, in the PPACA, which will go to defray the cost of purchasing government-mandated insurance.

By Jeff Carlson, CCH News Staff

Industry News

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January 8, 2016

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