IRS powerless to stop tax scam costing billions each year

The Inspector General for the IRS said Thursday that the tax collection agency continues to be at risk of paying out billions of dollars in fraudulent Earned Income Tax Credit payments each year, and that there's nothing the IRS can do about it.

The Treasury Inspector General for Tax Administration released a report that said almost 25 percent of EITC payments issued last year should not have been issued. That amounts to $15.6 billion in payments under a program that's meant to boost low and moderate-income people and families.

The IG noted that last year's omnibus spending bill gave the IRS some tools to address the problem, but not enough to stop it completely. Specifically, it said the bill didn't give the IRS expanded authority to actually correct errors in EITC payments when it finds them, and that the IRS doesn't have the resources to police the fraudulent payments.

"Without this authority, the IRS continues to be unable to address the majority of potentially erroneous EITC claims it identifies," the IG wrote. "As a result, billions of dollars in potentially erroneous EITC claims go unaddressed each year," it added.