Here's how the IRS can reduce some improper EITC payments

Reliable Data Is Needed To Effectively Reduce Improper Earned Income Tax Credit Payments for Nonwork Social Security Numbers Why did we do this audit? We examined the IRS’s ability to prevent improper Earned Income Tax Credit (EITC) payments made using nonwork Social Security Numbers (SSNs). Nonwork SSNs are issued to certain noncitizens who are not authorized to work in the United States but require an SSN to access specific services or benefits.   What did we find? The IRS cannot efficiently identify and prevent improper EITC claims associated with ineligible nonwork SSNs from being paid. For Tax Years 2023 and 2024 we identified approximately 67,000 tax returns with a nonwork SSN claiming the EITC. These tax returns claimed the EITC totaling nearly $219 million, of which nearly $213 million was paid. The IRS does not have sufficient or reliable data to accurately and efficiently determine why a nonwork SSN was issued or the taxpayer’s current citizenship status. The Social Security Administration (SSA) provides information to the IRS to help identify potentially improper EITC claims with nonwork SSNs. However, the SSA data shared with the IRS does not indicate the reason a nonwork SSN was issued to an individual. Individuals who obtained a nonwork SSN solely to receive a federal benefit are not eligible to receive the EITC. Additionally, the SSA data reflects the individual’s status at the time the nonwork SSN was issued. An individual’s immigration and/or work status could change after the nonwork SSN is issued, which could change their eligibility for the EITC. If the IRS had sufficient and reliable data, they could consider using math error authority to systemically deny EITC claims with ineligible nonwork SSNs. Math error authority allows the IRS to quickly address certain errors on tax returns. However, the IRS must consider that the data provided by the SSA currently does not reflect changes to a person’s immigration or work status. IRS Counsel and Taxpayer Services indicated that understanding what external information is available could help enhance current processes and inform decisions on using math error authority. Without increased interagency data sharing (consistent with applicable law), and reliable information, the IRS’s efforts to prevent claims with an ineligible nonwork SSN from being paid will be limited to risk-based identification and manual review. While effective, these processes are inefficient at addressing the overall EITC improper payment rate.   For more information: Read the full report Having trouble viewing this email? View it as a Web page.

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