The Treasury Inspector General for Tax Administration, in a recent report, pointed to various control weaknesses at the Internal Revenue Service, many of which had to do with its computer systems, that led to the agency erroneously granting Child and Dependent Care Credits on multiple occasions.

Among other things, the report pointed out that:

• The credit is not supposed to be allowed if a care provider is the primary taxpayer, spouse or dependent of a taxpayer, but there are no instructions to reject such applications. The IRS’s system does not check whether the care provider’s taxpayer identification number matches that of a dependent;
• IRS systems do not automatically reject applications with obviously false taxpayer identification numbers on the Form 2441, like 123456789, 111111111 or 888888888;
• The system does not automatically reject returns lacking a qualifying person’s name or TIN;
• The system does not filter for further review any claims for a child born after the tax year for which the claim was made;
• The IRS lacks processes to review the prior-year tax return to ensure the maximum credit amount has not already been claimed; certain people were able to circumvent limits by taking advantage of a programming limitation that prevents the IRS from verifying the accuracy of prior-year expenses. Lacking sufficient information from the tax return itself, the IRS programmed its system to simply allow up to $2,100 of expenses for all prior CDCC claims on the Tax Year...

Read Full Story: https://www.accountingtoday.com/news/tigta-urges-irs-to-update-computer-code-...