IRS Miscalculated Thousands of Child Tax Credits, TIGTA Says

Several thousands of eligible taxpayers received either too much or too little of their 2021 Child Tax Credit due to IRS calculation errors, according to an audit from the Treasury Inspector General for Tax Administration.

The American Rescue Plan Act of 2021, which increased the CTC from $2,000 to $3,000 per child under the age of 18 and $3,600 for children under the age of 6, allowed taxpayers to receive up to half of their credit in advanced payments. An automated IRS process recalculated the CTC amounts based on advance payments posted to a taxpayers’ account.

• TIGTA found 3.8 million tax returns included discrepancies between IRS and taxpayer calculated CTC amounts.
• Some 6,833 taxpayers received a total of $10.5 million in excess while 105 taxpayers didn’t receive all of their eligible credit, estimated at a total of $139,000.
• TIGTA believes there are still uncovered advance payments of $1 billion, even after the IRS implemented a processing change.

IRS agreed with most of TIGTA’s recommendations to identify and correct erroneous tax returns. However, it did not agree to recover incorrect advance payments from those who did not file a tax return.

“The IRS considers taxpayer service its top priority,” wrote Kenneth Corbin, commissioner of the Wage and Investment Division, in response to the draft audit report.

“We understand TIGTA’s concern about taxpayers who received advance payments yet didn’t file a tax return for reconciliation of the payments. However, taxpayers who received an advanced payment but did not meet the minimum filing requirement were not required to file a 2021 tax return. Requesting a return from them would not be good customer service,” Corbin wrote.