The IRS has erroneously accepted claims from over two million taxpayers who were not entitled to draw education tax credits, according to a report from the Treasury Inspector General for Tax Administration, and the cost is in the billions of dollars. Not only that, but the error is expected to increase billions of dollars more.
The inspector general’s report, issued Thursday, said that it assessed the ability of the IRS to identify erroneous claims for the refundable tax credit known as the American Opportunity Tax Credit , created by the American Recovery and Reinvestment Act of 2009 to help taxpayers offset the cost of higher education. What it found was that an estimated 2.1 million taxpayers may have gotten $3.2 billion in refunds based on claims to which they were not entitled, and the problem is expected to escalate.
Initially the IRS disputed inspector general’s findings; subsequently it notified the inspector general that it had indeed found a high percentage of claims with no supporting documentation to be erroneous.