Tax-Return Screening Inefficiency of the Internal Revenue Service: What can be done to Increase Compliance and Detection of Erroneously Claimed Educational Credits?

Abstract

On January 31st, 2018, Treasury Inspector General for Tax Administration (TIGTA) issued a report examining the effectiveness of the agency specifically under the 2017 Tax Filing Season. The report is referenced as 2018-40-012. According to the report, during 2017 tax filing season, billions of dollars in potentially erroneous American Opportunity Tax Credits Continue to be issued. As noted in the TIGTA report, 1.2% of the returns filed during 2017 tax season contained an error and resulted in improper refunds due to American Opportunity Tax Credit error alone. This is a significant error on the part of the Internal Revenue Service that creates inefficiency and under-collection of revenue. This paper will identify possible solutions to the issue that could increase in the revenue as much as $2.8 billion on annual basis