TIGTA Releases Report on Accuracy of Advance Child Tax Credit Payments
The Treasury Inspector General for Tax Administration (TIGTA) recently released a report presenting the results of its audit assessing the accuracy of IRS procedures in the distribution of last year’s advance Child Tax Credit (CTC) payments.
The report shared that as of December 2021, the IRS had issued 216.9 million advance CTC payments totaling $93.5 billion. TIGTA reviewed 178.9 million of the payments made between July and November of 2021, totaling more than $76.7 billion, and found the IRS correctly sent more than 175.6 million (98%) of the payments, totaling about $75.6 billion.
However, the IRS also sent 3.3 million payments, totaling over $1.1 billion, to 1.5 million taxpayers who were not eligible to receive the advance CTC payments. Additionally, the IRS did not send 8.3 million payments, totaling about $3.7 billion, to 4.1 million eligible taxpayers, the report said.
The American Rescue Plan Act (ARPA), enacted in March 2021, increased the CTC amount from $2,000 to $3,000 per child under the age of 18 ($3,600 for children under the age of 6) for tax year 2021 and also made the credit fully refundable to eligible taxpayers. The report acknowledged the speed of the IRS in implementing the distribution of the payments. The first monthly payments were issued on July 15, 2021, four months after the ARPA was enacted. The IRS continued issuing the payments on a monthly basis through Dec. 15, 2021.
The ARPA required the IRS to send eligible taxpayers reconciliation letters identifying advance payments they received. In its review of the 57.1 million reconciliation letters sent to taxpayers, TIGTA found only 6,829 letters that were not sent to taxpayers or that were sent stating an incorrect amount. The report said that issue was mainly due to the reversals of advance payments that were not reflected in the reconciliation letters. TIGTA will continue to monitor payment reversals made after letters are issued in a review of the reconciliation of CTC payments in 2022.
The report also stated the need for the IRS to develop processes to ensure the validity of bank account information received from third parties, as TIGTA identified 11,459 payments, totaling $4.2 million, that were erroneously sent to 523 bank accounts. Additionally, the IRS erroneously updated 1,610 taxpayers' direct deposit information with bank account information connected to a payroll allotment account.
TIGTA made five recommendations in the report. The recommendations included taking steps to prevent taxpayers from receiving incorrect advance payments, informing taxpayers that their payments may have been sent to other accounts they own and validating files from third-party sources before they are used. The IRS agreed with all of TIGTA'S recommendations. The IRS said it has posted transaction codes on impacted accounts to block additional payments to ineligible taxpayers and that it intends to implement procedures to validate files from third-party sources.