The IRS paid more than $6 billion in child tax credits in 2013 to people who were not eligible to receive them, a government watchdog said Tuesday.
Payments went to families that mistakenly claimed the tax credit or claimed the wrong amount, as well as taxpayers who committed fraud, according to an audit by J. Russell George, the Treasury inspector general for tax administration.
The once-championed way to help low-income working families is now facing problems with how it is ran.
The 2009 economic stimulus package temporarily expanded the credit to more families that don't make enough money to pay federal income tax. The expanded credit expires at the end of 2017.
These families receive the $1,000-per-child credit in the form of a tax refund. The report focus on payments to these families.
The IRS has said the risk is low for improper payments related to the child tax credit. The report says that assessment is incorrect.
"It is imperative that the IRS take action to identify and address all of its programs that are at high risk for improper payments," George said in a statement.
In a statement, the IRS aid it "continues to aggressively explore new ways to detect and stop potentially fraudulent claims while maximizing the use of limited compliance resources."
However, the agency said budget cuts are hurting compliance efforts.
"IRS funding limitations severely hamper our efforts on these and other compliance areas," the agency statement said. "Since 2010, the IRS budget has been reduced by $850 million and we have 13,000 fewer employees."
Earlier this year, the IRS said fewer agents are auditing tax returns than at any time since at least the 1980s.
More than 36 million families claimed about $57 billion in child tax credits in 2013, according to the nonpartisan Joint Committee on Taxation.
The inspector general's report estimates that taxpayers improperly claimed between $5.9 billion and $7.1 billion in child tax credits that year. The report, however, does distinguish between fraud and credits that were claimed by mistake.
The Associated Press contributed to this report