Control weaknesses have allowed potentially erroneous refunds of more than $513 million to be received by taxpayers who most likely did not qualify this filing season, the Treasury Inspector General for Tax Administration has said.
The agency has taken positive steps to strengthen controls and help prevent the $8,000 first-time homebuyer credits from being issued inappropriately, according to the audit.
It said that while the IRS implemented filters to identify questionable claims and that it received math error authority to deny homebuyer credits if proper documentation was not provided, these remedies occurred after millions in credits had been issued.
TIGTA called on the IRS to require taxpayers to provide documentation for all claimed credits, and to seek authority to deny claims if all documentation is not provided.
The IRS also should go after erroneous credits, including claims for purchases from related persons, invalid addresses, taxpayer’s previous address, and invalid acquisition dates, said the IG.
Management generally agreed with the audit but TIGTA said management should take a more timely and proactive approach to denying fraudulent claims.
