The Internal Revenue Service accidentally sent out $1.1 billion in advanced child tax credits, meant for lower to middle-income families, to 1.5 million taxpayers who should not have received them last year.
The agency also failed to distribute $3.7 billion in tax credits to 4.1 million eligible households, the results of a Treasury Department audit released Tuesday showed.
J. Russell George, the Treasury Department’s inspector general for tax administration, claimed that the IRS mishandled billions in funds between July and December 2021 due to a change in refund payments from annually to monthly.
The change in payment distribution was part of President Joe Biden’s $1.9 trillion American Rescue Plan Act, which included a one-year increase of the tax credit to $3,600 for each child six and up and $3,000 for each one aged six through 17.
According to the inspector general, his office made five recommendations to the IRS on how to better implement tax credit payments in the future, including: “prevent taxpayers from receiving additional improper advance Child Tax Credit payments, inform taxpayers of the possibility that their advance payments may have been sent to other accounts the taxpayers may own, and validate incoming files from third-party sources prior to their use.”
The IRS reportedly agreed to all five recommendations and has either already enacted the changes or plans to in the near future.
News of the incident comes after Congress approved roughly $80 billion in new funding to the tax enforcement agency through the Biden administration’s “Inflation Reduction Act,” which could increase its workforce by almost 87,000.
Earlier this month, the IRS admitted to mistakenly releasing the personal information online of close to 120,000 taxpayers who filed a 990-T form in their tax returns.
Although the leak temporarily exposed the names, contact information, and reported income of those affected, social security numbers were reportedly not exposed, The Wall Street Journal reported.
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