Millions of taxpayers who were eligible for payments did not receive them, while millions of ineligible individuals did.
A new report from the Treasury Inspector General for Tax Administration (TIGTA) on the IRS’s handling of advance child tax credit payments to taxpayers last year contains both good and bad news.
First, the good news: TIGTA discovered that the IRS correctly sent more than 175.6 million payments to recipients, totaling approximately $75.6 billion, between July and November 2021, during its audit. The purpose of this audit was to evaluate IRS processes and procedures to make sure that child tax credit advance periodic payments were accurate and distributed only to taxpayers who were eligible.
The bad news is that TIGTA discovered that 3.3 million payments worth a total of more than $1.1 billion were distributed to 1.5 million tax-paying citizens who shouldn’t have received the funds. Furthermore, the IRS failed to send 8.3 million payments totaling $3.7 billion to 4.1 million eligible taxpayers.
The American Rescue Plan Act of 2021, passed by Congress and signed into law on March 11, 2021, expanded the child tax credit and authorized monthly payments of varying amounts to eligible families and individuals based on their adjusted gross incomes and if they have children, the ages of their children.
The first monthly payments were made on July 15, only four months after the law was passed, and they will be paid until January 1, 2022. The IRS had issued 216.9 million payments totaling $93.5 billion as of December 2021.
While the IRS made mistakes, TIGTA praised the tax agency for preparing for this “significant undertaking” in such a short period of time.
TIGTA stated that among the taxpayers who received erroneous advance child tax credit payments, there were instances where a dependent did not meet age limits, was dead, or was claimed on another tax return.
TIGTA stated that it used the same method to identify taxpayers who were eligible for an advance child tax credit payment but had not received one from the IRS. TIGTA stated that it “immediately notified IRS management to figure out the reason for the nonpayment and ensure that action(s) were taken to send payments to eligible taxpayers” for the July and August 2021 payments.
The IRS emphasized its 98% accuracy rate during the limited timeframe provided in its official response to TIGTA’s findings. “These accomplishments were achieved while the IRS was addressing challenges associated with the coronavirus-19 pandemic on in-person processes and while implementing retroactive legislation that affected the tax year 2020 returns after the filing season was underway,” the tax agency added.
According to the IRS, it collaborated closely with TIGTA audit staff, who “provided near real-time analysis and issue identification at frequent and regular intervals.”
According to the Wall Street Journal, many people who received payments they should not have received were required to repay the money on their 2021 tax returns, which were due in early 2022.
Similarly, people who did not receive advance payments in 2021 could claim the full amount they were eligible for on their tax returns, even if the lack of payments affected them in 2021. This group included people who had taxpayer-identification numbers, which are issued to people who do not have Social Security numbers.
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