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The IRS Might Recover EITC Using Its Newly Discovered Post-Processing Math Error Authority, But Is It Constitutional?

Nina Olson- IRS Might Recover Earned Income Tax Credit

My June Report to Congress included an Area of Focus entitled: “The IRS Has Expanded Its Math Error Authority, Reducing Due Process for Vulnerable Taxpayers, Without Legislation and Without Seeking Public Comments.”  The post-processing math error issue came up after a report by the Treasury Inspector General for Tax Administration (TIGTA) said the IRS improperly paid refundable credits, including the Earned Income Tax Credit (EITC), to those filing 2016 returns with taxpayer identification numbers (TINs) (e.g., Social Security Numbers) that were issued after the due date of the returns. TINs are long strings of numbers that can easily contain typos. The IRS committed to “evaluate this population for inclusion in the appropriate post-refund treatment program.”  Perhaps because it costs $1.50 to resolve an erroneous EITC claim using automated math error authority (MEA) compared to $278 for an audit (according to TIGTA), the Wage and Investment Division (W&I) planned to use MEA to recover these credits in 2018.

I asked Counsel about the legality of using MEA to disallow credits long after the IRS had processed the returns (i.e., post-processing) and paid them. Counsel responded on April 10, 2018, with a Program Manager Technical Advice (PMTA) that approved the practice (here). It concluded there were no due process concerns. This blog explores the due process that the government may be constitutionally required to provide before recovering EITC from those who depend on it to survive.

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