Audit finds IRS paid $6 billion erroneously

WASHINGTON – The IRS paid at least $6 billion in child tax credits in 2013 to people who weren’t eligible to receive them, a government investigator said Tuesday.

Payments went to families that mistakenly claimed the tax credit or claimed the wrong amount, as well as taxpayers who committed fraud, according to an audit by J. Russell George, the Treasury inspector general for tax administration.

The audit highlights problems with a tax credit that President Barack Obama has championed as a way to help low-income working families.

Obama’s 2009 economic stimulus package temporarily expanded the credit to more families that don’t make enough money to pay federal income tax. These families receive the $1,000-per-child credit in the form of a tax refund. The report released Tuesday focused on payments to these families.

The expanded tax credit expires at the end of 2017.

For years, the IRS has said the risk is low for improper payments related to the child tax credit. The report says that assessment is incorrect.

In a statement, the IRS said it “continues to aggressively explore new ways to detect and stop potentially fraudulent claims while maximizing the use of limited compliance resources.”

However, the agency said budget cuts are hurting compliance efforts.

“IRS funding limitations severely hamper our efforts on these and other compliance areas,” the agency statement said. “Since 2010, the IRS budget has been reduced by $850 million and we have 13,000 fewer employees.”