A lack of effective oversight at the Internal Revenue allowed more than $5 billion in potentially fraudulent college aid payments to be doled out under an Obama administration stimulus effort, according to a report released Tuesday by the agency's inspector general.
Almost 4 million students were able to claim more than $5.6 billion in tax credits in 2012 alone, and the IRS still hasn't figured out how to stop more bogus credits from being claimed in the future, the Treasury Inspector General for Tax Administration said, reported The Daily Caller.
"The IRS still does not have effective processes to identify erroneous claims for education credits," says the report. "Although the IRS has taken steps to help address some of our recommendations, many of the deficiencies [the inspector general] previously identified still exist. As a result, taxpayers continue to receive billions of dollars in potentially erroneous education credits."
Of that $5.6 billion, the report said about $3.2 billion in credits was given to 2 million taxpayers who failed to file the correct form to claim it, and some $2.5 billion in credits was awarded to students who were enrolled in colleges that don't qualify for the credits. An additional $650 million was sent to 400,000 taxpayers who claimed the American Opportunity Tax Credit for longer than the allowed four years, which should have automatically resulted in a rejection.
The report even found that 250 inmates in correctional facilities claimed credit as students.
Debra Hollan, commissioner of the IRS Wage and Investment Division, disagreed with the findings, saying that the agency has already implemented significant oversight measures.
"We disagree with the Treasury Inspector General for Tax Administration's (TIGTA) finding that the IRS does not have effective procedures," she wrote, according to the Washington Free Beacon. "To the contrary ... IRS identified 1.8 million questionable returns for potential audit."
That means the IRS only "identified 50 percent of the more than 3.6 million questionable education credit claims we identified during our review," Michael McKenney, the IRS deputy inspector general for audit, pointed out.
The report noted that it isn't just the Obama administration or the IRS who is at fault; Congress could give the tax agency more power to tap into government databases to verify that student's are actually eligible to receive the credits, for example. The report also acknowledged that the IRS suffered significant cuts in manpower since 2010, losing several thousand employees and resulting in an inability to audit every questionable claim.
The tax credits in question began in 2007 and are designed to offset costs of college. They were incorporated into President Obama's 2009 stimulus plan and renamed the American Opportunity Tax Credit. It was supposed to expire in 2010, but Congress extended it through 2017.
Republican Sen. Orrin Hatch, chair of the Senate Finance Committee, was quite critical of the findings:
"The findings of today's TIGTA report once again spell trouble for the IRS and call into question their ability to properly administer the American Opportunity Tax Credit (AOTC)," Hatch said. "This partially refundable tax credit was established as part of the stimulus, but unfortunately, as today's report shows, the IRS has only succeeded in stimulating waste by not effectively identifying erroneous claims. Even worse, TIGTA found that ineligible individuals continue to receive erroneous credits. The IRS owes it to American families and hardworking taxpayers to properly safeguard their hard-earned dollars and not dole them out to people who are not qualified to receive such credits."
