2.1 Million Taxpayers May Have Received $3.2 Billion In Erroneous Education Tax Credits
An estimated 2.1 million taxpayers may have received $3.2 billion in erroneous education credits, according to a new report from the Treasury Inspector General for Tax Administration (TIGTA).
The American Recovery and Reinvestment Act of 2009 created a refundable tax credit called the American Opportunity Tax Credit (AOTC) to help taxpayers offset the cost of higher education. This credit has been extended to 2011 and 2012 returns. TIGTA assessed the effectiveness of the IRS processes to identify erroneous AOTC claims.
TIGTA found that 1.7 million taxpayers erroneously received an estimated $2.6 billion in education credits even though the Internal Revenue Service (IRS) had no supporting documentation that these taxpayers had attended an eligible institution, defined as an accredited institution of higher learning.
While the IRS initially did not agree with the amount of erroneous claims identified by TIGTA, it subsequently informed TIGTA that it has found a high percentage of the claims with no supporting documentation to indeed be erroneous. IRS management noted that they expect the percentage found to be erroneous to further grow and have increased the number of tax returns they plan to review with this condition in Fiscal Year 2012.
