The IRS was in a frenzy trying to reconcile the monthly payments of the Child Tax Credit that the agency issued in 2021 to the number of recipients that reported they received the CTC credit. According to a new report that was released by the Treasury Inspector General for Tax Administration(TIGTA). Many recipients of the Child Tax Credit never even filed a return, resulting in the IRS sending approximately $1 billion in erroneous CTC payments.
Overview
When the American Rescue Plan Act was initiated in 2021, the amount of money received for Child Tax Credit Payments was increased from $2,000 to $3,000 for all children under the age of 18. The American Rescue Plan Act also made these credits fully refundable to certain taxpayers, as the agency began refunding these credits monthly. This resulted in the IRS having to scramble in order to quickly set up a system for distributing these payments, including those who were yet to file a tax return.
Total CTC Payments Issued
In total, the Internal Revenue Service Issued roughly 217 million CTC advance payments resulting in $93.5 billion being sent out by the agency. According to the TIGTA report, the IRS essentially estimated the payment amount based on tax information from the year before. When it comes to people that don’t usually file returns, the agency relied on its nonfiler tools to estimate the advance payment amount.
TIGTA Analysis
The same TIGTA report goes on to say that upon its review of the agency’s reconciliation process, 6,833 taxpayers were identified that received incorrect CTC payment amounts because the IRS tax examiner incorrectly resolved conditions that ultimately allowed more credits to be received than the taxpayer was allowed. This resulted in $10.5 million in excess payments being sent out by the IRS. Upon further analysis, it was also discovered that 105 taxpayers did not receive the full CTC payment amount that they were entitled to. This resulted in approximately $140,000 not being received by taxpayers.
Wrap Up
Despite TIGTA recommending that the IRS implements a program to potentially recover the erroneous payments, the agency declined that recommendation. The IRS also declined to identify the taxpayers that received more in CTC payments than they should have.