Tags: Barack Obama | IRS Scandal | tax | reform | losses | Treasury

Treasury IG: Stimulus Led to Billions in Revenue Losses

By    |   Wednesday, 06 May 2015 08:16 PM

A key component of President Barack Obama's tax reform has likely led to billions of dollars' worth of fraud and collection losses for the federal government, says a Treasury Department report.

The report, by the Treasury Inspector General for Tax Administration (TIGTA), found that millions of taxpayers wrongly claimed education deductions to slash their tax bills in 2012.

"The potential fraudsters have exploited lax oversight to take advantage of Obama's $2,500 American Opportunity Tax Credit (AOTC), which was initially passed in the so-called [2009] stimulus, as well as President Bill Clinton's Hope and Lifetime Learning Credits," the Washington Free Beacon reports.

This includes up to 1 million tax filers who "falsely claimed the AOTC, leading to a potential loss of $1.3 billion," the website added.

The AOTC is being billed as a major part of the Obama administration's push for a "simpler, fairer tax code" that "responsibly invests in middle-class families."

According to the White House, Obama's plan "will consolidate six overlapping education provisions into just two, while improving the American Opportunity Tax Credit to provide more students up to $2,500 each year over five years as they work toward a college degree."

The administration bills this as a measure "cutting taxes for 8.5 million families and students and simplifying taxes for the more than 25 million families and students that claim education tax benefits."

But according to Treasury Inspector General J. Russell George, the IRS has failed to implement procedures making the AOTC less susceptible to abuse.

"As a result, taxpayers continue to receive billions of dollars in potentially erroneous education tax credits," he said.

Debra Holland, commissioner of the IRS Wage and Investment Division, responded that the agency had already implemented significant oversight procedures for identifying fraud.

She said the IRS disagrees with TIGTA's finding that it lacks such procedures.

"To the contrary," Holland argued, "IRS identified 1.8 million questionable returns for potential audit."

Michael McKenney, TIGTA's deputy inspector general for audit, acknowledged those findings in a memo to the IRS. But even so, he said, the agency still deserved a failing grade for its oversight.

While the IRS has processes to identify erroneous education credit claims, they "only identified 50 percent of the more than 3.6 million questionable education credit claims we identified during our review," he added.

"As such, we believe the conclusion is accurate that the IRS' processes are not effective in identifying erroneous education credit claims."

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A key component of President Barack Obama's tax reform proposal has likely led to billions of dollars' worth of fraud and collection losses for the federal government, says a Treasury Department report.
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2015-16-06
Wednesday, 06 May 2015 08:16 PM
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