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American Rescue Plan Act:
Implementation of Premium Tax Credit Provisions
May 2, 2022
Report Number: 2022-47-034
TIGTACommunications@tigta.treas.gov | www.treasury.gov/tigta
TREASURY INSPECTOR GENERAL FOR TAX ADMINISTRATION
HIGHLIGHTS: American Rescue Plan Act: Implementation of Premium Tax Credit Provisions
Final Audit Report issued on May 2, 2022
Report Number 2022-47-034
Why TIGTA Did This Audit
This audit was initiated to evaluate
the IRS’s implementation strategy
of the expanded premium tax
credit eligibility rules and ensure
the accuracy of Tax Year 2020
recovery adjustments.
This is part of a series of audits
that TIGTA is conducting to
monitor the IRS’s continued
response to the pandemic. This
work is to help ensure that eligible
individuals are receiving relief as
intended.
Impact on Tax Administration
The American Rescue Plan Act
(ARPA) of 2021 includes several
provisions that temporarily
enhance benefits and expand the
eligibility for the premium tax
credit. For Tax Year 2020, under
Section 9662, taxpayers were not
required to repay any excess
advanced premium tax credits
(APTC). For Tax Years 2021 and
2022, under Section 9661,
taxpayers have increased premium
tax credits for all income brackets
and reduced premiums that they
will be required to pay.
Additionally, under Section 9663,
taxpayers who received or were
approved to receive
unemployment compensation in
Calendar Year 2021 are considered
to have met the household income
requirements for premium tax
credit eligibility and will not pay
premiums if they are enrolled in a
benchmark plan or a less
expensive plan.
What TIGTA Found
The IRS took immediate steps to remove excess APTC repayment
from Tax Year 2020 returns in accordance with Section 9662 of the
ARPA. As of August 12, 2021, the IRS provided relief for nearly
1 million taxpayers by removing $942 million in APTC repayments
from their returns, which resulted in $845 million in tax reductions to
these taxpayers’ accounts as part of the ARPA recovery efforts.
Although the IRS took timely actions to implement the applicable Tax
Year 2020 provisions of the ARPA, TIGTA identified 30,231 taxpayers
who may now qualify for Additional Child Tax Credits totaling
$16.4 million. These taxpayers, however, must take additional actions
to receive these additional benefits.
In addition, the IRS did not develop processes and procedures to
verify the accuracy of premium tax credit claims based on
unemployment compensation. Specifically, the IRS is not requiring
documentation to support a taxpayer’s claim that they received or,
more importantly, were approved to receive unemployment
compensation when it is the sole basis for their premium tax credit
claim. IRS management stated that they are not requiring taxpayers
to provide documentation but stated that a check box was added on
the Form 8962, Premium Tax Credit (PTC). This checkbox will serve as
both attestation and documentation of the taxpayer’s receipt or
approval of unemployment compensation. The IRS indicated that it
plans to conduct a limited number of attestation verifications as part
of their post-processing compliance efforts.
Finally, the IRS has an opportunity to help educate taxpayers and
inform them of their options if they are victims of domestic violence.
TIGTA issued three alerts to IRS management during its review. IRS
management took action or plans to take action to address each of
these alerts.
What TIGTA Recommended
TIGTA made four recommendations to the IRS. These include
notifying eligible taxpayers that they may qualify for additional
recovery monies due to the removal of excess APTC repayments,
updating taxpayer outreach on its public-facing website, and
updating Form 8962 instructions to inform taxpayers of their options
to report to the IRS that they are a victim of domestic violence.
The IRS agreed with all four of TIGTA’s recommendations.
U.S. DEPARTMENT OF THE TREASURY
WASHINGTON, D.C. 20220
TREASURY INSPECTOR GENERAL
FOR TAX ADMINISTRATION
May 2, 2022
MEMORANDUM FOR: COMMISSIONER OF INTERNAL REVENUE
FROM:
Michael E. McKenney
Deputy Inspector General for Audit
SUBJECT:
Final Audit Report – American Rescue Plan Act: Implementation of
Premium Tax Credit Provisions (Audit # 202140726)
This report presents the results of our review to evaluate the Internal Revenue Service’s
implementation strategy of the expanded premium tax credit eligibility rules and ensure the
accuracy of Tax Year 2020 recovery adjustments. This review is part of our Fiscal Year 2022
Annual Audit Plan and addresses the major management and performance challenge of
Administration of Tax Law Changes and Pandemic Relief Benefits.
Management’s complete response to the draft report is included as Appendix III.
Copies of this report are also being sent to the Internal Revenue Service managers affected by
the report recommendations. If you have any questions, please contact me or Russell P. Martin,
Assistant Inspector General for Audit (Returns Processing and Account Services).
American Rescue Plan Act: Implementation of Premium Tax Credit Provisions
Table of Contents
Background .....................................................................................................................................Page 1
Results of Review .......................................................................................................................Page 2
The IRS Successfully Issued Advanced Premium Tax
Credit Repayment Adjustments on the Majority of Tax
Returns .....................................................................................................................................Page 3
Notices Are Being Sent to Taxpayers Regarding Their
Eligibility to Claim Additional Child Tax Credits .......................................................Page 4
Recommendations 1 and 2: .....................................................Page 4
Recommendation 3: ...................................................................Page 5
Processes and Procedures Have Not Been Developed to
Verify the Accuracy of Premium Tax Credit Claims When
Unemployment Compensation Is Reported ..............................................................Page 5
Opportunities Exist to Help Victims of Domestic Violence ..................................Page 7
Recommendation 4: ...................................................................Page 8
Appendices
Appendix I – Detailed Objective, Scope, and Methodology ................................Page 9
Appendix II – Outcome Measure ...................................................................................Page 11
Appendix III – Management’s Response to the Draft Report .............................Page 12
Appendix IV – Abbreviations ...........................................................................................Page 18
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Background
The American Rescue Plan Act of 2021 (ARPA) was signed into law on March 11, 2021,1 and
includes several provisions that temporarily enhance benefits and expand the eligibility for the
premium tax credit (PTC).2 Specifically, Section 9662 of the ARPA eliminates the requirement to
repay any excess advanced premium tax credit (APTC) for Tax Year (TY) 2020.3 If a taxpayer’s
APTC exceeds the actual PTC, no additional tax is imposed, regardless of household income.
In addition, ARPA Section 9661 increases the PTC for all income brackets for coverage years
beginning in 2021 and 2022. For 2021 and 2022, the ARPA applies a new premium percentage
owed by households at all income levels. Households may be eligible for a temporary increase
in PTCs, with no one paying more than 8.5 percent of their household income towards the cost
of the benchmark plan or a less expensive plan. Prior to the ARPA, households eligible for a PTC
had to contribute up to 9.86 percent of their household income towards the cost of the
benchmark plan or a less expensive plan. Additionally, prior to the ARPA, households with
incomes greater than 400 percent of the Federal Poverty Level were not eligible for the PTC.
Under the ARPA, taxpayers with household income over 400 percent of the Federal Poverty
Level may be eligible for a PTC.
Finally, under ARPA Section 9663, a taxpayer who receives or is approved to receive
unemployment compensation for as little as one week during Calendar Year 2021 qualifies for
special PTC rules for the entire year. Under these rules:
•
Taxpayers are treated as an “applicable taxpayer” who qualifies for the PTC.
•
The taxpayer’s household income in excess of 133 percent of the Federal Poverty Level
for a family of the size involved is not taken into account in calculating the PTC.
As a result of the second rule, if household income for Calendar Year 2021 exceeds 133 percent
of the Federal Poverty Level, the PTC will be calculated as if the income was 133 percent of the
Federal Poverty Level. This will generally increase a taxpayer’s PTC because a taxpayer with a
household income at 133 percent of the Federal Poverty Level does not pay premiums if
enrolled in the benchmark plan or one of the other less expensive options.
Premium tax credit
Under the Affordable Care Act,4 individuals who enroll in qualified health plans may be eligible
for PTCs. The PTC reduces the cost of the qualified health plan’s premium and is claimed at the
time the individual files their tax return. Eligible individuals may also have advance payments of
1 Pub. L. No. 117-2 135 Stat. 4.
2 The PTC is a refundable credit that helps eligible individuals and families cover the premiums for their health
insurance purchased through the Health Insurance Marketplace.
3 In previous tax years and for tax years that begin after 2020, individuals whose APTC is more than the PTC they are
allowed (called excess APTC) must repay some or all of the excess APTC when they file their Federal tax return for that
year.
4 The Patient Protection and Affordable Care Act, Pub. L. No. 111-148, 124 Stat. 119 (2010), as amended by the Health
Care and Education Reconciliation Act of 2010, Pub. L. No. 111-152, 124 Stat. 1029, is known as the Affordable Care
Act.
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the PTC (referred to as APTC) made on their behalf to lower the cost of their premiums. The
amount of the APTC is determined when individuals sign up for health insurance coverage
through the HealthCare.gov Marketplace and is based on the estimated household income for
the year of coverage as well as other qualifying factors.
Taxpayers to whom the APTC was paid are required to file a Federal tax return to reconcile the
amount of the APTC paid on their behalf with the amount of the PTC they are allowed, based on
their actual household income and other factors, for the year. This reconciliation is completed
on Form 8962, Premium Tax Credit (PTC). If the APTC is more than the PTC, the taxpayer has
excess APTC and must repay the excess, subject to certain limitations. If the APTC is less than
the PTC, the taxpayer can get a credit for the difference, which reduces their tax payment or
increases their refund.
As of August 17, 2021, for TY 2020, 6.2 million tax returns were filed with $27.6 billion in APTC
received by taxpayers; however, these taxpayers were eligible for only approximately
$26.8 billion in PTC. When taxpayers reconciled at the time they filed their returns, there was
$2.4 billion in excess APTC, of which over $1.5 billion was required to be repaid.5
Results of Review
The Internal Revenue Service (IRS) took immediate steps to remove excess APTC repayments
from TY 2020 returns in accordance with Section 9662 of the ARPA. As of August 12, 2021, the
IRS provided relief for 955,604 taxpayers by removing $941.6 million in APTC repayments from
their returns, which resulted in $845.5 million in tax reductions to these taxpayers’ accounts as
part of the ARPA recovery efforts.6 Although the IRS took timely action to implement the
applicable TY 2020 provisions of the ARPA, we identified 30,231 taxpayers who may now qualify
for Additional Child Tax Credits totaling $16.4 million. These taxpayers, however, must take
additional actions to receive these additional benefits. Our review also focused on the
implementation strategy for ARPA Section 9663, which applies to TY 2021 returns, and found
that the IRS did not develop adequate processes and procedures to identify potential abuse and
improper payments.
We issued three alerts to IRS management during the period June to October 2021 that detailed
deficiencies identified during our review. The IRS has taken actions or plans to take actions to
address each of our alerts.
5 For TY 2020, taxpayers received a total of $27.6 billion in APTC, $2.4 billion of which was in excess of allowable PTC
(over $1.5 billion had to be repaid and approximately $814 million did not). Additionally, almost $1.6 billion in PTC
was allowable in excess of the APTC. Therefore, the total allowable PTC for TY 2020 equals $26.8 billion.
6 During Processing Year 2021, as of August 12, 2021, we identified approximately 1.5 million taxpayers who had filed
their TY 2020 tax returns claiming over $1.5 billion in APTC repayments that should be removed. The ARPA excluded
from taxable income up to $10,200 in unemployment compensation income received by a taxpayer in 2020, and the
IRS is adjusting those separately. We have a separate review evaluating the IRS’s efforts to adjust returns with
unemployment compensation income, including those with APTC repayments.
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The IRS Successfully Issued Advanced Premium Tax Credit Repayment
Adjustments on the Majority of Tax Returns
Our review of returns filed as of August 12, 2021, for Processing Year 2021 identified
995,178 TY 2020 tax returns reporting over $997.7 million in APTC repayments that under the
ARPA were not required to be repaid. On April 9, 2021, shortly after the passage of the ARPA,
the IRS issued guidance instructing taxpayers that, if they had not already filed their TY 2020
returns, they should exclude any APTC repayment. This guidance was issued in an effort to help
reduce the number of taxpayer accounts that the IRS would have to adjust. Subsequently on
April 25, 2021, the IRS began systemically adjusting tax returns to remove the APTC repayment
amount. As of August 12, 2021, the IRS sent for processing 955,604 (96 percent) of the
995,178 tax returns that needed to be adjusted; 944,894 of which the IRS accurately adjusted by
removing APTC repayments totaling $941.6 million and providing $845.1 million in net tax
reductions to these taxpayers.
The IRS has continued to systemically adjust the remaining tax returns with APTC repayments
as well as identify any additional returns that may have been filed or processed after
August 12, 2021. The IRS anticipates that the APTC recovery adjustments will be completed
around February 2022. However, some of these returns cannot be systemically adjusted
because there are certain conditions present on taxpayers’ tax accounts (e.g., freeze code) that
prevent the systemic adjustment from occurring. To address these types of return filings, the
IRS assigned a group of employees within the Accounts Management function to manually
adjust the tax returns. As of August 19, 2021, the IRS sent 8,820 accounts to the Accounts
Management function for manual adjustment. As of September 22, 2021, the Accounts
Management function has adjusted 5,578 (63 percent) of these accounts.7
The IRS made a clerical error in APTC recovery and erroneously removed $12 million from
tax returns
On November 5, 2021, the IRS provided account details for 3,681 taxpayers who were issued
erroneous adjustments in September 2021. These taxpayers should have had over $6.4 million
in APTCs removed from their tax returns; however, the IRS removed $18.5 million dollars from
their tax returns, leaving $12.1 million in erroneous adjustments. Upon discovering the clerical
error, the IRS immediately began trying to recover and reverse the erroneous refunds. As of
November 18, 2021, we identified that 3,358 taxpayers8 had over $15.9 million in refunds issued
relating to the APTC recovery, and refunds were reversed for only 1,947 taxpayers with over
$10.4 million in erroneous refunds. We confirmed that the IRS issued reversal transactions on all
but two accounts to correct the error. Any refunds not immediately recovered will go through
the IRS’s normal collection procedures.9 As of December 3, 2021, the IRS recovered $9.1 million
(76 percent) of the erroneous refunds issued.
7 During reporting, the IRS stated that these accounts have all been manually adjusted. However, they are continuing
to identify and process additional manual cases as needed.
8 For 323 taxpayers (3,681 less 3,358), we were unable to confirm if any refunds on the taxpayer accounts were
associated with an erroneous APTC removal.
9 The IRS collections process can consist of the issuance of notices (bills) to taxpayers, application of subsequent
refunds to existing balances, liens, levies, and contact from field collections officers.
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Notices Are Being Sent to Taxpayers Regarding Their Eligibility to Claim
Additional Child Tax Credits
Our review of TY 2020 tax returns, as of August 12, 2021, identified 30,231 taxpayers who, based
on the IRS adjusting their APTC repayments, are now eligible to claim $16.4 million in Additional
Child Tax Credits. The following is a hypothetical example of how a taxpayer would become
eligible to receive the Additional Child Tax Credit when their APTC repayment is adjusted:
Taxpayer X had an excess APTC repayment of $2,600 on their 2020 tax return and had
one eligible child for whom they claimed the full Child Tax Credit of $2,000. Taxpayer X
did not claim the Additional Child Tax Credit when they originally filed their return.
When the excess APTC repayment was removed, the reduction in tax resulted in
Taxpayer X not being able to claim any of the Child Tax Credit, and therefore, the
taxpayer could now claim the Additional Child Tax Credit to receive up to $1,400 for
their eligible child.
We notified management of the fact that they were not instructing taxpayers whose excess
APTC repayment amounts were adjusted that, if they became newly eligible for a tax credit, they
would need to submit an amended return. Conversely, the IRS did provide this type of
information to taxpayers with an unemployment compensation adjustment.
Recommendation 1 (e-mail alert): On June 25, 2021, we notified the Director, Customer
Account Services, and Director, Customer Assistance, Relationships, and Education, of our
concerns with their inconsistent messaging related to the ARPA unemployment compensation
and APTC adjustments. We recommended that the IRS update its public-facing website to
present consistent messaging to affected taxpayers.
Management’s Response: The IRS agreed with this recommendation and has updated
its public-facing website to present consistent messaging related to the ARPA
unemployment compensation and APTC adjustments.
We also asked the IRS to provide its strategy to notify taxpayers that they may need to file an
amended return to receive their full recovery monies. IRS management stated that they would
send a Computer Paragraph (CP) 08, You May Qualify for a Refund from the Additional Child Tax
Credit, notice to taxpayers.
Recommendation 2 (e-mail alert): On September 17, 2021, we notified the Commissioner,
Wage and Investment Division, and Chief Information Officer of our concerns that the IRS’s
plans for issuing these notices had not been finalized. We recommended that the IRS ensure
the systemic issuance of CP 08 notices to affected taxpayers.
Management’s Response: The IRS agreed with this recommendation and generated
over 95,000 CP 08 notices and over 165,000 CP 09, Earned Income Credit – You May Be
Entitled to EIC, notices on December 29, 2021. They were sent to taxpayers who did not
file an original tax return with Form 1040, U.S. Individual Income Tax Return,
Schedule 8812, Credits for Qualifying Children and Other Dependents, or Form 1040
Schedule EIC, Earned Income Credit Qualifying Child Information, and may be eligible for
the credits after the completion of the recovery adjustments. This did not apply to those
to whom a CP 08 or CP 09 notice had already been issued when their original return was
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processed. In February 2022, the IRS identified an additional 14,000 and 3,000 taxpayers
to whom a CP 08 or CP 09 notice, respectively, will be issued.
Recommendation 3 (e-mail alert): On October 21, 2021, we notified the Director, Customer
Accounts Services, of our concerns with taxpayer outreach and communications as it relates to
the IRS’s plan to issue CP 08 notices. We recommended that the IRS update its public-facing
communications informing taxpayers that, if eligible, they will be receiving notices from the IRS
with additional instructions on how to receive their full recovery monies.
Management’s Response: The IRS agreed with this recommendation and has updated
its messaging to taxpayers on IRS.gov for both the unemployment compensation and
the APTC adjustments. IRS management also issued a press release on
November 1, 2021, to indicate planned actions to make corrections for the Earned
Income Tax Credit, Additional Child Tax Credit, American Opportunity Credit, Premium
Tax Credit, and Recovery Rebate Credit amounts affected by the exclusion.
We provided the IRS the list of the 30,231 affected taxpayers identified by our review. Although
the IRS agreed to the majority (27,461) of our affected taxpayer population, it disagreed with
2,770 of our identified accounts primarily because the taxpayer did not claim the full Child Tax
Credit at the time of their original return filing, and it would have been determined at
processing whether the taxpayer should have been issued a CP 08 notice. Therefore,
27,461 taxpayers should receive CP 08 notices allowing them to determine their eligibility for the
Additional Child Tax Credit and claim the nearly $14.8 million in potential recovery monies.
Once taxpayers receive their notice, it will be incumbent upon them to provide the IRS with the
additional requested documentation to claim their additional monies, at which time the IRS will
then place these correspondences into its regular processing queue.
Processes and Procedures Have Not Been Developed to Verify the Accuracy of
Premium Tax Credit Claims When Unemployment Compensation Is Reported
Applicable only for TY 2021, a taxpayer who receives or is approved to receive unemployment
compensation for as little as one week during Calendar Year 2021 will not be responsible for any
premiums associated with their healthcare coverage. In our discussions with IRS management,
they stated that they are not developing processes and procedures to verify at the time tax
returns are processed the accuracy of taxpayers’ claims that they received or were approved to
receive unemployment compensation claims. The IRS stated that it has added a check box on
Form 8962, which will serve as both attestation and documentation of the taxpayer’s receipt or
approval of unemployment compensation (see checkbox A in Figure 1).
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Figure 1: Form 8962, Premium Tax Credit (PTC) – Tax Year 2021
Source: Excerpt of TY 2021 Form 8962.
Actions should be taken to address the potential risk for improper payments resulting
from ARPA Section 9663
On September 29, 2021, we notified IRS management of our concerns with the potential
reporting of improper unemployment claims to receive the PTC. Specifically, we told them of
our concern that the IRS is not requiring documentation to support a taxpayer’s claim that they
received or, more importantly, were approved to receive unemployment compensation when it
is the sole basis for their PTC claim. We recommended that the IRS:
• Require documentation at the time of filing.
• Update the instructions to Form 8962 and associated Publication 974, Premium Tax Credit
(PTC), to notify taxpayers that, by checking the box on Line A, they are confirming they
either received or were eligible to receive unemployment compensation during 2021 and
should retain any documentation noting such with their tax records.
• Conduct outreach campaigns to taxpayers regarding maintaining documentation related
to unemployment compensation.
• Implement systemic programming that will identify returns with potentially questionable
claims for the PTC. For example, systemic processes could be developed to identify
returns for which unemployment income is reported elsewhere on the return to validate
those claims and allow them to continue in processing while causing any claims with no
such indication of unemployment compensation to be held from processing until further
information can be obtained from the taxpayer to validate the claim.
The IRS disagreed or partially disagreed with most of our recommendations. The IRS stated that
requiring documentation typically not required at the time of filing would cause undue burden
on taxpayers and noted the unavailability of Forms 1099-G, Certain Government Payments,
information returns at the time of processing. The IRS indicated that it plans to verify the
attestation as part of its post-processing compliance efforts. As of November 19, 2021, the IRS
has not yet finalized the post-processing compliance plan for these case selections. However,
the IRS noted that these cases will be a small subset of its refundable credit compliance
program.
Management also stated that any TY 2021 programming is not likely possible due to timing and
resource availability. However, management partially agreed to update Form 8962 instructions
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and agreed to conduct taxpayer outreach through planned communication actions through
options such as IRS.gov, news releases, social media platforms, etc.
Opportunities Exist to Help Victims of Domestic Violence
The IRS has an opportunity to help educate taxpayers and inform them of their options if they
are victims of domestic violence. The header section of Form 8962 includes a checkbox for
taxpayers to identify themselves as victims of domestic abuse or spousal abandonment10 for the
purposes of qualifying for the PTC if they are married filing separately (see Figures 2 and 3).
Figure 2: Form 8962, Premium Tax Credit (PTC) – Tax Year 2020
Source: Excerpt of TY 2020 Form 8962.
Figure 3: Excerpt of Form 8962 Instructions
Source: Excerpt of TY 2020 Form 8962 Instructions.
Our analysis of TY 2019 Forms 8962 found that 14,273 taxpayers had checked the box for
victims of domestic abuse or spousal abandonment. The IRS developed a specific indicator that
it places on the tax accounts denoting a taxpayer could be a victim of domestic violence (VODV).
The VODV indicator is presently set on tax accounts when a victim contacts the IRS and indicates
they have been a VODV and requests the indicator be placed on their account or completes
Part V of Form 8857, Request for Innocent Spouse Relief. This indicator is set to alert IRS
employees of a taxpayer’s situation when they contact the IRS. As of May 27, 2021,
34,759 taxpayers had a VODV indicator on their tax account.
On November 18, 2021, we notified IRS management of our concern that, of the 14,273 tax
accounts associated with individuals checking the box on Forms 8962, only 13 tax accounts had
a VODV indicator present. We recommended that the IRS consider the checkbox on Form 8962
as an additional means by which a taxpayer is reporting abuse and systemically place a VODV
indicator on their account. IRS responded noting that permanently setting an indicator based
on the Form 8962 without a direct request from the taxpayer may negatively impact the
10 A taxpayer is a victim of spousal abandonment for a tax year if, taking into account all facts and circumstances, the
taxpayer is unable to locate their spouse after reasonable diligence.
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taxpayer. The IRS provided insight that some taxpayers do not want an indicator on their
account and noted that the Form 8857 was revised to allow taxpayers to directly communicate
their desire to have the indicator set on (or removed from) their tax account.
Although we agree, we believe that the IRS has an additional opportunity to educate taxpayers
of their options to notify the IRS they are a VODV by updating the Form 8962 instructions.
Recommendation 4: The Commissioner, Wage and Investment Division, should update the
Form 8962 instructions to inform taxpayers of the methods for reporting they are a VODV.
Management’s Response: The IRS agreed with this recommendation and plans to
include VODV in the next revision of the instructions for Form 8962.
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Appendix I
Detailed Objective, Scope, and Methodology
The overall objective of our review was to evaluate the IRS’s implementation strategy of the
expanded PTC eligibility rules and ensure the accuracy of TY 2020 recovery adjustments. To
accomplish our objective, we:
•
Determined the implementation strategy the IRS intends to execute to address the new
changes to PTCs under the ARPA. We interviewed applicable IRS personnel regarding
the management and implementation of the new ARPA requirements; monitored the
public-facing website of the IRS to determine what communication and messages the
IRS was presenting to affected taxpayers; and reviewed and documented applicable IRS
guidance, alerts, forms, and other associated documents related to the changes to the
PTC under the ARPA.
•
Determined whether recovery adjustments made by the IRS through August 2021
accurately removed and refunded excess APTC repayments on taxpayer TY 2020 returns
that were filed. We identified and quantified the impacted population of taxpayers who
had excess APTC repayments on their TY 2020 returns and compared these returns to
the IRS recovery adjustments made through August 12, 2021. We also identified the IRS
procedures and actions taken for accounts that could not be systemically adjusted.
•
Determined and quantified the population of affected taxpayers as of August 12, 2021,
who would not automatically receive the full recovery and identified the IRS’s plan to
communicate with these taxpayers.
Performance of This Review
This review was performed with information obtained from IRS Wage and Investment Division,
Customer Accounts Services, during the period April through December 2021. We conducted
this performance audit in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain sufficient, appropriate
evidence to provide a reasonable basis for our findings and conclusions based on our audit
objective. We believe that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objective.
Major contributors to the report were Russell P. Martin, Assistant Inspector General for Audit
(Returns Processing and Account Services); Diana M. Tengesdal, Director; Nina A. Hill, Audit
Manager; Taylor C. McDonald, Lead Auditor; Jon-Michael G. Socaris, Senior Auditor; Zachary R.
Caraccilo, Auditor; and Laura P. Haws, Information Technology Specialist (Data Analytics).
Validity and Reliability of Data From Computer-Based Systems
We performed tests to assess the reliability of data from the Treasury Inspector General for Tax
Administration Data Center Warehouse, results from the Treasury Inspector General for Tax
Administration Tax Simulator Tool, and electronic information obtained from IRS sources. We
evaluated the data by (1) performing electronic testing of required data elements, (2) reviewing
existing information about the data and the system that produced them, and (3) interviewing
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agency officials knowledgeable about the data. We determined that all data used were
sufficiently reliable for purposes of this report.
Internal Controls Methodology
Internal controls relate to management’s plans, methods, and procedures used to meet their
mission, goals, and objectives. Internal controls include the processes and procedures for
planning, organizing, directing, and controlling program operations. They include the systems
for measuring, reporting, and monitoring program performance. We determined that the
following internal controls were relevant to our audit objective: the IRS implementation strategy
to address the new tax law changes affecting PTCs under the ARPA and IRS controls to
accurately adjust taxpayer accounts for TY 2020 return filings to remove the requirement to
reconcile excess APTC on taxpayer returns. We evaluated these controls by verifying the
accuracy of adjustments made to remove excess APTC repayments from applicable TY 2020
returns.
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Appendix II
Outcome Measure
This appendix presents detailed information on the measurable impact that our recommended
corrective actions will have on tax administration. This benefit will be incorporated into our
Semiannual Report to Congress.
Type and Value of Outcome Measure:
•
Taxpayer Rights and Entitlements – Potential; 27,461 taxpayers who, after the IRS’s
removal of excess APTC, may be eligible for an additional $14,762,645 in recovery
monies by claiming the Additional Child Tax Credit (see Recommendations 1, 2, and 3).
Methodology Used to Measure the Reported Benefit:
As of August 12, 2021, we identified 30,231 taxpayers whose APTC recovery was limited because
the taxpayer did not have a Schedule 8812, Additional Child Tax Credit, attached to their original
return. The removal of the excess APTC repayments from their tax returns, under ARPA
Section 9662, may now make them eligible to claim the Additional Child Tax Credit. These
taxpayers may receive $16,370,514 in additional recovery monies if they file an amended return
or otherwise provide to the IRS the necessary information to claim the Additional Child Tax
Credit. The IRS agreed to the majority (27,461) of our affected taxpayer population; however, it
disagreed with 2,770 of our identified accounts primarily because the taxpayer did not claim the
full Child Tax Credit at the time of their original return filing, and it would have been determined
at processing whether the taxpayer should have been issued a CP 08 notice. Therefore,
27,461 taxpayers should receive CP 08 notices allowing them to determine their eligibility for the
Additional Child Tax Credit and claim the potential $14,762,645 in recovery monies.
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Appendix III
Management’s Response to the Draft Report
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Appendix IV
Abbreviations
APTC
Advanced Premium Tax Credit
ARPA
American Rescue Plan Act of 2021
CP
Computer Paragraph
IRS
Internal Revenue Service
PTC
Premium Tax Credit
TY
Tax Year
VODV
Victim of Domestic Violence
To report fraud, waste, or abuse,
call our toll-free hotline at:
(800) 366-4484
By Web:
www.treasury.gov/tigta/
Or Write:
Treasury Inspector General for Tax Administration
P.O. Box 589
Ben Franklin Station
Washington, D.C. 20044-0589
Information you provide is confidential, and you may remain anonymous.