TIGTA report says that IRS fails to pursue millions of dollars in potentially improper claims for the saver’s credit

According to a report released by the Treasury Inspector General for Tax Administration (TIGTA), the IRS has failed to pursue potentially improper claims for the qualified retirement savings contributions credit (saver’s credit).

Since 2002, the saver’s credit has allowed certain low- to moderate-income workers who contribute to a qualified retirement plan to lower their income tax liability. For the 2011 tax year, taxpayers received approximately $1.1 billion in saver’s credits.

TIGTA audited the IRS to determine whether IRS controls were adequate to identify improper claims for the saver’s credit. According to TIGTA’s findings, which were partially redacted in the report, the IRS has implemented sufficient controls for submission processing but has failed to implement certain other controls. TIGTA determined that, for 2011, taxpayers potentially made approximately $53 million in improper claims for contributions made to a qualifying retirement account. These claims appeared to be potentially either false or overstated.

TIGTA recommended that the Commissioner, Wage and Investment Division, develop a cost-effective strategy for improving compliance with requirements for claiming the credit. IRS officials agreed that improvements could be made, but they did not agree with the recommendation because they did not believe that there were any cost-effective compliance alternatives. TIGTA reiterated that the IRS should follow through with the recommendation.

Source: TIGTA, “Millions of Dollars in Potentially Improper Claims for the Qualified Retirement Savings Contribution Credit Are Not Pursued,” March 26, 2014, Reference Number: 2014-10-017.

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