Potential $34 Million Error in Amended Return Refunds

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The Treasury Inspector General for Tax Administration (TIGTA) recently released a report (Reference number 2016-30-032) stating that improvements are necessary within the IRS’s examination process for approving amended returns with claims for refunds and abatements. TIGTA found that within a statistical sample of 84 amended returns that 31 claims were not appropriately substantiated. The sample results were then projected to the population and TIGTA estimated that a total of approximately $34.4 million in tax refunds and abatements may have been inappropriately allowed.

You may be asking, “What is TIGTA?” Well, TIGTA is the IRS’s watchdog. It was established in 1999 in accordance with the Internal Revenue Service Restructuring and Reform Act of 1998, and it is responsible for all audit and investigation activities related to the work of the tax administration. TIGTA initiated this audit specifically to determine whether the IRS’s controls over the auditing of amended tax returns with claims are being properly implemented and the refunds are being accurately processed.

Karen Schiller, the commissioner of the IRS’s Small Business/Self-Employed Division, issued a statement disagreeing with TIGTA’s projected estimate. In response to the report, Schiller stated that she believes the outcome measures are overstated; however, she confirms that most of the recommendations made by TIGTA will be implemented by the IRS to help improve specific controls and procedures in the examination of amended returns. Does this mean that refunds from amended returns are going to taking longer to get? Well, probably. Only time will tell.

By Stacy Redmond