Financial News

IRS Has Given Away Billions In Bogus Education Tax Credits, Blames Budget Cuts

IRS Has Given Away Billions In Bogus Education Tax Credits, Blames Budget Cuts

Reported by Ryan Brennan

The IRS allegedly handed out $5.6 billion in education tax credits that are now being considered as bogus. The number is “more than a quarter of all education credits claimed by taxpayers,” as one government source stated on Tuesday.

As new reports are being released by the agency’s inspector general, more details about the error are being revealed. In 2012, more than 3.6 million taxpayers were handed questionable credits. A good majority of the credits were given out to college students. The problem is that the IRS reported as never receiving a tuition statement from the schools. For some students, they attended schools that didn’t quite make the eligibility list for the federal funding. For other students, they found themselves short on the class limit in order to qualify for the tax break.

J. Russell George, Treasury inspector general for tax administration, believes that the service has been working to better their efforts in policing the credits. However, he still believes they have a long ways to go. “The IRS still does not have effective processes to identify erroneous claims for education credits,” said George.

Back in 2011, George addressed that the IRS issued nearly $3.2 billion in education credits that were later deemed as bogus in 2010. “As a result, taxpayers continue to receive billions of dollars in potentially erroneous education credits,” George added.

Among their efforts to step up their enforcements, the IRS was proud to announce a steep drop in issued credits during 2012. In 2011, the IRS issued $23.6 billion in education credits. In 2012, they only issued $19.1 billion in education credits. They have been working to reach out to Congress for help in solving their issues. They feel that “simplifying the education tax credits” and giving the IRS more tools when validating a student’s eligibility will ultimately lead to the result they want to see.

In a statement released by the IRS, they defended themselves from the criticism.

“Since 2010, the IRS budget has been reduced by nearly $1.2 billion and we expect to have 16,000 fewer employees by the end of this fiscal year,” the statement read. “We simply do not have the resources to audit every questionable credit.”

“It’s also important to note the IRS believes the dollar estimates in this report are overstated, and the methodology could be more accurate,” the statement continued.


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