Accountancy Slice

North America

The IRS's estimated improper payments for four refundable tax credits increased to $28.1bn in fiscal year 2025, with the overall improper payment rate rising from 21.9% to 26.5%, according to a TIGTA report. The watchdog found the IRS failed to meet requirements under the Payment Integrity Information Act of 2019, which aims to reduce improper payment rates below 10%, citing limited ability to verify taxpayer eligibility before issuing refunds and a sharp decline in prerefund examinations. TIGTA recommended the IRS work with the Treasury Department and Congress to pursue legislative changes, expand error-correction authority, improve data-sharing to verify eligibility, and strengthen taxpayer outreach. The IRS agreed with the recommendations, stating that complex eligibility rules, limited access to verification data, and staffing reductions have contributed to improper payments. The report also noted that prerefund examinations have fallen about 70% over the past three years, and estimated the IRS would need approximately 12,700 additional examiners and $3.4bn annually to conduct enough reviews to meet the statutory payment integrity target.