Assessment of Fiscal Year 2025 Compliance With Improper Payment Reporting Requirements (TIGTA, July 27, 2026)

Summary

A final audit report of the Treasury Inspector General for Tax Administration, Report Number 2026-400-039, dated July 27, 2026, assessing whether the IRS complied with improper payment reporting requirements of the Payment Integrity Information Act for Fiscal Year 2025. The report finds that the IRS did not comply with all PIIA requirements because it did not reduce the improper payment rate to less than 10 percent for its high-risk refundable tax credit programs. It states that the overall improper payment rate rose from 21.9 percent in FY 2024 to 26.5 percent in FY 2025, with estimated improper payments of approximately $28.1 billion. TIGTA made five recommendations, including seeking legislative changes to refundable credit eligibility, and IRS management agreed with all of them.

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“Assessment of Fiscal Year 2025 Compliance With Improper Payment Reporting Requirements (TIGTA, July 27, 2026).” Original at www.oversight.gov. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/2026400039fr-4b68c7d7be/, SHA-256 facc2c11c3b7afce2d9ab3cce4cfc4198df80a7ccd39e770ded1f1aa30f96de8.

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TREASURY INSPECTOR GENERAL FOR TAX ADMINISTRATION

Assessment of Fiscal Year 2025 Compliance With
Improper Payment Reporting Requirements

July 27, 2026

Report Number: 2026-400-039

TIGTACommunications@tigta.treas.gov | www.tigta.gov 1
HIGHLIGHTS: Assessment of Fiscal Year 2025 Compliance
With Improper Payment Reporting Requirements
Final Audit Report issued on July 27, 2026 Report Number 2026-400-039

Why TIGTA Did This Audit What TIGTA Found
The Inspectors General are For FY 2025, the IRS
required to annually assess and did not comply with
report on agency improper all PIIA requirements
payment requirements contained because it did not
in the Payment Integrity reduce the improper
Information Act (PIIA). payment rate to less
than 10 percent for
We assessed whether the IRS
the 4 high-risk
complied with annual improper
refundable tax credit
payment reporting requirements
programs.
for Fiscal Year (FY) 2025.
Additionally, the
Impact on Tax Administration IRS's overall
An improper payment is any improper payment rate increased from 21.9 percent in FY 2024 to
payment that should not have 26.5 percent in FY 2025.
been made or that was made in an For the IRS to effectively reduce improper payment rates and prevent
incorrect amount. financial loss to the government, it would need to prevent refunds
from being issued during return processing. The IRS runs various
The IRS has four programs that
automated checks on a tax return before paying a refund, but it has
they have deemed susceptible to
limited ability and information to timely verify taxpayer eligibility. For
improper payments. All four
example, the IRS reported that from FYs 2023 through 2025, it used
programs are refundable tax
math error authority to reduce total claims by approximately
credits and include the Additional
2 percent ($7.6 billion), adjusting claims from $330.5 billion to
Child Tax Credit, American
approximately $322.8 billion.
Opportunity Tax Credit, Earned
Income Tax Credit, and Net Outside of its existing math error authority, however, the IRS does
Premium Tax Credit. A refundable not have sufficient or reliable data to systemically prevent ineligible
tax credit can result in a refund individuals from receiving refundable credits. For example,
even if the taxpayer does not have relationship eligibility criteria cannot be verified at the time of filing.
a tax liability. Therefore, improperly Therefore, the IRS generally must examine questionable refundable
issuing these credits to taxpayers tax credit claims before issuing a refund to prevent financial loss to
represents a significant financial the government. However, the IRS reported that it examines less than
loss to the government. one percent of returns claiming these credits. Additionally, in the past
three FYs, prerefund examinations of refundable credits have
For FY 2025, the overall improper
declined by approximately 70 percent.
payment rate for the four
refundable tax credits was The IRS indicated that it would continue to focus on outreach and
26.5 percent and the total education in lieu of increasing examinations in a prerefund
estimated improper payments environment. However, these strategies make little impact on the
were approximately $28.1 billion. IRS’s overall improper payment rate. Without legislative intervention,
it is likely the IRS’s improper payment rate will continue to remain
above the 10 percent threshold.
What TIGTA Recommended
We made five recommendations to the IRS including: work with
Office of Tax Policy and Congress to request legislative changes to
refundable credits eligibility; increase correctable error authority;
create data sharing agreements with external partners to systemically
verify refundable credit eligibility; and improve its social media
strategies. IRS management agreed with all of our recommendations.
Treasury Inspector General for tax administration seal.

U.S. DEPARTMENT OF THE TREASURY
WASHINGTON, D.C. 20024

TREASURY INSPECTOR GENERAL
FOR TAX ADMINISTRATION

July 27, 2026

MEMORANDUM FOR: COMMISSIONER OF INTERNAL REVENUE

FROM: Diana M. Tengesdal
Deputy Inspector General for Audit

SUBJECT: Final Audit Report – Assessment of Fiscal Year 2025 Compliance With
Improper Payment Reporting Requirements (Audit No.: 2026400001)

This report presents the results of our review to determine whether the Internal Revenue Service
complied with the annual improper payment reporting requirements for Fiscal Year 2025. This
review is part of our Fiscal Year 2026 Annual Program Plan and addresses the major
management and performance challenge of Ensuring Tax Compliance.
Management’s complete response to the draft report is included as Appendix IV. If you have any
questions, please contact me or Deann L. Baiza, Assistant Inspector General for Audit (Returns
Processing and Account Services).
Assessment of Fiscal Year 2025 Compliance With Improper Payment Reporting Requirements

Table of Contents
Background .....................................................................................................................................Page 1

Results of Review .......................................................................................................................Page 2
Fiscal Year 2025 Assessment of the IRS’s Compliance With
Improper Payment Reporting Requirements ............................................................Page 2
Legislative Changes Are Needed to Reduce Refundable Tax Credit
Improper Payments.............................................................................................................Page 3
Recommendations 1 through 3: ................................................... Page 7

The IRS Could Expand Social Media Outreach to Increase
Awareness for Refundable Credit Eligibility ...............................................................Page 8
Recommendations 4 and 5: ............................................................ Page 9

Appendices
Appendix I – Detailed Objective, Scope, and Methodology................................Page 10
Appendix II – Additional Guidance for Improper Payments................................Page 11
Appendix III – Programs Identified for Improper Payment Risk
Assessments...........................................................................................................................Page 12
Appendix IV –Management’s Response to the Draft Report ..............................Page 13
Appendix V – Abbreviations.............................................................................................Page 18
Assessment of Fiscal Year 2025 Compliance With Improper Payment Reporting Requirements

Background
An improper payment is any payment that should not have been made or that was made in an
incorrect amount (including both overpayments and underpayments). The Payment Integrity
Information Act of 2019 (PIIA) requires agencies to annually report on all programs and activities
and identify those that may be susceptible to significant improper payments.1 Agencies must
estimate annual improper payments in susceptible programs and activities and report the results
of their efforts to address improper payments.
Further, the Office of Management and Budget (OMB) Circular A-123 Appendix C,
Requirements for Payment Integrity Improvement, directs agencies to conduct an improper
payment risk assessment at least once every three years for programs with annual outlays of
more than $10 million. The Department of the Treasury (herein referred to as the Treasury
Department) identifies the programs that the IRS must assess for the risk of improper payments
each fiscal year (FY). The IRS must also complete a Treasury certification for each program that
was not identified as needing a risk assessment stating there were no material changes (e.g.,
legislative changes, internal control changes, or audit reports impacting improper payments) to
the program since the last risk assessment was completed.2 Every year, Inspectors General must
review agency compliance with improper payment legislation and guidance.
For FY 2025, the IRS completed 12 certifications and 9 risk assessments for the required
programs.3 If a program is identified as susceptible to significant improper payments, the
following must be reported:
• The rate and dollar amount of improper payments.
• The root causes of the improper payments.
• The actions taken to address the root causes.
• The annual improper payment reduction targets.
• A discussion of any limitations to the IRS’s ability to reduce improper payments.
The IRS has identified four programs as being susceptible to improper payments. All four
programs are refundable tax credits and include the Additional Child Tax Credit (ACTC),
American Opportunity Tax Credit (AOTC), Earned Income Tax Credit (EITC), and
Net Premium Tax Credit (PTC). A refundable tax credit can result in a refund even if the taxpayer
does not have a tax liability. As a result, improperly issuing these credits to taxpayers represents
a significant financial loss to the government.
For FY 2025, the overall improper payment rate for the four refundable tax credits was
26.5 percent and the total estimated improper payments were approximately $28.1 billion. The
improper payment rates for these four programs ranged from 13.6 percent for the ACTC to

1
31 U.S.C. §§ 3351-3358.
2
See Appendix II for a list of additional legislation governing improper payments.
3
See Appendix III for a detailed list of the nine programs that had risk assessments.
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Assessment of Fiscal Year 2025 Compliance With Improper Payment Reporting Requirements

32.7 percent for the EITC. Figure 1 provides a breakdown of the total payment amount for each
of the refundable credits and the estimated improper payment amount and rate.

Figure 1: FY 2025 IRS Estimated Improper Payment Rates for
Refundable Credits
Estimated Improper
Estimated Improper Total Payments
IRS Program Payments
Payment Rate (in Billions)
(in Billions)
ACTC 13.6% $33.4 $4.5
AOTC 30.7% $5.0 $1.5
EITC 32.7% $64.7 $21.1
Net PTC 31.6% $2.6 $0.8
4 26.5% $105.7 $28.1
Total
Source: FY 2025 Treasury Department Agency Financial Report. For FY 2025, the IRS reported
on claims and improper payments associated with Tax Year 2023 tax returns filed in 2024 and
2025. Total amounts may not add up due to rounding.

Results of Review
Fiscal Year 2025 Assessment of the IRS’s Compliance With Improper
Payment Reporting Requirements
For FY 2025, we determined that the IRS did not comply with all PIIA requirements. The IRS did
not meet the PIIA goal of reducing the improper payment rate to less than 10 percent for the
4 high-risk refundable tax credit programs. Additionally, the IRS failed to demonstrate
improvements to payment integrity. The IRS’s overall improper payment rate increased from
21.9 percent in FY 2024 to 26.5 percent in FY 2025. Figure 2 summarizes our evaluation of the
IRS’s compliance with the FY 2025 improper payment requirements.

4
The Total Improper Payment Rate is calculated by dividing the total estimated improper payment by the total
payment amount.
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Assessment of Fiscal Year 2025 Compliance With Improper Payment Reporting Requirements

Figure 2: Compliance With Improper Payment
Requirements for FY 2025
Improper Payment Requirement
IRS Compliance Met – Yes
Published payment integrity information with the annual financial statement.
Posted the annual financial statement and accompanying materials to
agency website.
Conducted improper payment risk assessments for each program with annual outlays greater
than $10 million at least once in the last 3 years.
Adequately concluded whether programs are likely to make improper payments and
unknown payments above or below statutory threshold.5
Published improper payment and unknown payment estimates for programs susceptible to
significant improper payments and unknown payments in the accompanying materials to the
annual financial statement.
Published corrective action plans for each program for which an estimate above the statutory
threshold was published in the accompanying materials to the annual financial statement.
Published an improper payment and unknown payment reduction target for each program for
which an estimate above the statutory threshold was published in the accompanying
materials to the annual financial statement.
Developed a plan to meet the improper payment and unknown payment
reduction target.
IRS Compliance Met – No
Demonstrated improvements to payment integrity or reached a tolerable improper payment
and unknown payment rate.
Reported an improper payment and unknown payment estimate of less than 10% for each
program for which an estimate was published in the accompanying materials to the annual
financial statement.
Source: Analysis of the IRS’s compliance with improper payment requirements for FY 2025.

Legislative Changes Are Needed to Reduce Refundable Tax Credit Improper
Payments
The IRS has not been able to reduce its improper payment rate estimates to less than 10 percent
for each of its high-risk refundable tax credit programs, and in FY 2025 these rates increased.
However, we do not believe the IRS can achieve this goal with its current authority and
resources.
According to the FY 2025 Treasury Department Agency Financial Report (AFR), to meet this
target, the IRS would need to reduce refundable credit improper payments by $17.5 billion to
reach the goal of 10 percent. Figure 3 provides a comparison of the improper payment rates for
FYs 2023 through 2025.

5
Unknown payments are payments made by a program where it is still unknown whether the payment is proper or
improper. Payments are reported as unknown so that a program does not unintentionally over or under report the
payment type results.
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Assessment of Fiscal Year 2025 Compliance With Improper Payment Reporting Requirements

Figure 3: FYs 2023 Through 2025 Improper Payment Rates

Source: FYs 2023 through 2025 Treasury Department AFRs.

Factors that contribute to improper payments of refundable credits
The FY 2025 Treasury Department AFR explains the complexities of the IRS’s refundable tax
credit programs and notes that errors are not caused by internal control weaknesses. Rather,
they are mostly due to factors beyond the IRS’s control. Our independent reviews of IRS
refundable tax credit programs support the Treasury Department’s assessment.6
The agency continues to report the following as the primary causes of refundable tax credit
errors.
· Complex statutory eligibility rules. Refundable tax credits generally have complex
eligibility rules, often relating to personal family and living arrangements. These eligibility
rules can vary across the refundable tax credits and can change from year to year. The
eligibility rules contribute to errors by taxpayers when claiming these credits.
· Inability to verify taxpayer-provided information. Taxpayer information, especially
relating to eligibility rules, is difficult for the IRS to verify at the time a taxpayer files a
return. Much of the information necessary to validate the accuracy of a refundable tax
credit claim before issuing a refund is not comprehensively available in any U.S.
government database.
· Limited correctable error authority. The IRS has limited authority, referred to as math
error authority, to correct mismatches at filing. Math error authority allows the IRS to

6
TIGTA, Report No. 2021-40-070, Addressing Complex and Inconsistent Earned Income Tax Credit and Additional
Child Tax Credit Rules May Reduce Unintentional Errors and Increase Participation (September 2021), TIGTA, Report
No. 2023-47-037, American Rescue Plan Act: Assessment of the Expanded Child and Dependent Care and Earned
Income Tax Credits (June 2023), and TIGTA, Report No. 2026-4S0-022, Reliable Data is Needed to Effectively Reduce
Improper Earned Income Tax Credit Payments for Nonwork Social Security Numbers (May 2026). Additional reports
assessing the IRS’s administration of refundable tax credits can be found at www.oversight.gov.
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Assessment of Fiscal Year 2025 Compliance With Improper Payment Reporting Requirements

systemically correct mathematical errors, certain scenarios related to Taxpayer
Identification Numbers, or entries on a tax return exceeding the statutory limit of the
credit claimed. However, this authority cannot be used to systemically evaluate
refundable credit claims for ineligibility. For example, the IRS cannot use math error
authority to systemically deny a claim if the taxpayer does not meet the required
relationship criteria. Therefore, outside of math error authority, the IRS must examine the
tax return when it has indications that the taxpayer is ineligible to claim refundable
credits.
· Statutory Refund Issuance Deadline. To prevent improper payments on refundable
credits, the IRS would need to stop refunds before they are paid to taxpayers. However,
this creates a challenge for the IRS given the statutory requirement to pay interest on
refunds that are issued more than 45 days from the return due date. Holding all
refundable credit claims to verify eligibility before refunds are issued would increase the
costs of interest payments on valid refund claims that could not be verified within the
45-day period. Consequently, the IRS is balancing the need to detect and prevent
improper payments and the requirement to timely issue refunds on valid claims.

Significantly reducing improper payments through prerefund examinations is
unachievable
The IRS runs various automated checks on a tax return before paying a refund. For example, the
IRS reported that from FYs 2023 through 2025, it used math error authority to reduce
refundable credit claims by approximately 2 percent ($7.6 billion). Using this authority, it
adjusted total claims from $330.5 billion to approximately $322.8 billion.7
The IRS also conducts prerefund and post refund examinations. However, these processes only
address a small percentage of refundable tax credit claims. The IRS examined less than one
percent of refundable credit claims for FYs 2023 through 2025. Also, during this same period,
prerefund examinations of refundable credits decreased approximately 70 percent along with
the total credits that were disallowed. For example, in FY 2025, the IRS reported that for pre and
post refund examinations it selected 79,000 (0.3 percent) of the 24.6 million tax returns claiming
EITC. Figure 4 provides a detailed breakdown of the IRS’s efforts to reduce refundable tax credit
improper payments through prerefund examinations.

7
Figures surrounding math error authority are rounded and may not reconcile.
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Assessment of Fiscal Year 2025 Compliance With Improper Payment Reporting Requirements

Figure 4: IRS Prerefund Examinations and Refundable Credits Disallowed
Have Decreased Substantially From FYs 2023 Through 2025

Source: The IRS’s examination metrics for FYs 2023 through 2025, M=million, K=thousand. Multiple
refundable credits can be claimed on a tax return.

One reason examinations are decreasing is due to reductions in staffing. Specifically, in FY 2025,
the IRS’s Refundable Credits Examination Operations Unit lost about 20 percent (86 examiners)
of its 439 examiners. The IRS has also reported that budget reductions resulted in decreased
examination staffing. Moreover, when the IRS received additional funding through the
Inflation Reduction Act, the Secretary of Treasury directed the IRS not to increase examinations
for taxpayers earning $400,000 per year or less.8 For example, the EITC is an anti-poverty credit
established by Congress for working families and is available to low and moderate-income
taxpayers.
In October 2020, the IRS estimated it would need to examine 4.2 million more tax returns before
issuing the refunds to be compliant with this goal. This is more than the IRS identifies annually
for potential examinations. At the time, the IRS estimated that the additional examinations
would cost more than $2.5 billion (an average of $595 per exam). Applying the IRS’s current
average cost of $804 for prerefund examinations, we estimate the cost to conduct 4.2 million
additional examinations has increased to $3.4 billion a year. In addition, we estimate that the IRS
would need 12,700 more examiners to conduct the additional examinations the IRS estimates
are needed.
The IRS could allocate examiners from other functions to conduct refundable tax credit
examinations. However, doing so would negatively affect the IRS’s ability to balance its
enforcement efforts across tax administration. We are conducting a separate review to assess
the IRS’s plans to improve the efficiency and effectiveness of the examination function with
fewer employees and enhanced technology.
Recently proposed legislation to address improper payments in federal programs indicates that
reducing financial loss to the government should be preventative in nature and that agencies

8
Inflation Reduction Act of 2022, Pub. L. No. 117-169, 136 Stat. 1818.
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Assessment of Fiscal Year 2025 Compliance With Improper Payment Reporting Requirements

should have access to appropriate records and data assets.9 In May 2025, we recommended that
the IRS work with the Office of Tax Policy to request additional legislative considerations that
will help the IRS reduce improper payments of refundable tax credits.10 Accordingly, the IRS
submitted to the Treasury Department a proposed legislative change addressing duplicate
dependent claims, which are associated with refundable credit noncompliance. However, there
has not been any progress with these proposed changes.
Legislative changes to simplify refundable credit requirements will make it easier for taxpayers
to correctly determine whether they are eligible and could reduce taxpayer errors. Ensuring that
the simplified requirements can be verified to reliable government data and providing the IRS
access to that data will enable it to accurately verify refundable credit claims when they are filed.
Finally, authorizing the IRS to systemically correct refundable credit claims when reliable data
indicates the taxpayer is ineligible will enable it to efficiently prevent the issuance of erroneous
refunds.

The Chief, Taxpayer Services, should:
Recommendation 1: Request that the Office of Tax Policy and Congress work on legislative
changes that would simplify and streamline refundable credit eligibility.
Management’s Response: IRS management agreed with this recommendation and will
share the report and recommendation with the Office of Tax Policy for consideration.
Recommendation 2: Identify specific areas within refundable credit tax administration where
additional correctable error authority could be requested. Once identified, request these
increased authorities via the Office of Tax Policy and Congress.
Management’s Response: IRS management agreed with this recommendation and will
identify the specific areas within refundable credit tax administration where additional
correctable error authority would be helpful and will share the information and this
report with the Office of Tax Policy.
Recommendation 3: Identify opportunities to work with external partners (i.e., other federal
agencies, states, and private institutions) and leverage available data to systemically verify
refundable credit eligibility. This should include working with the external partners to establish
data sharing agreements, and with the Office of Tax Policy and Congress to obtain access to the
data, if needed.
Management’s Response: IRS management agreed with this recommendation and will
identify opportunities to work with external partners and evaluate where sharing
agreements could leverage available data to systemically verify refundable credit
eligibility.

9
H.R. 8467, 119th Cong. (Introduced in House April 23, 2026), Zeroing Out Monetary Benefits Improperly Expended
Act (ZOMBIE Act).
10
TIGTA, Report No. 2025-400-025, Assessment of Fiscal Year 2024 Compliance With Improper Payment Reporting
Requirements p. 8 (May 2025).
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Assessment of Fiscal Year 2025 Compliance With Improper Payment Reporting Requirements

The IRS Could Expand Social Media Outreach to Increase Awareness for
Refundable Credit Eligibility
The IRS indicates in its corrective action plans that it will continue to focus on outreach and
education to reduce improper payments in lieu of increasing examinations. The IRS balances its
outreach strategies by focusing on reaching eligible taxpayers who are not claiming credits and
educating taxpayers and tax return preparers on the eligibility requirements.
Strategies include the Nationwide Tax Forum, targeted communication and education, updates
to guidance, and expanded engagement with tax professionals. As part of the outreach and
education strategies, the IRS has a Return Preparer Strategy Program, which combines education
and enforcement of tax return preparers. The treatment of return preparers is based on
egregiousness and may lead to barring preparers from preparing or filing tax returns. In
FY 2025, the Return Preparer Strategy Program reported protecting $467 million in revenue
through its various treatment strategies.
Moreover, the IRS generally uses the same strategies year after year. While these strategies are
helpful, they are not effective in significantly reducing the improper payment rate. As noted
previously, the improper payment rate for FY 2025 increased from the prior year. Figure 5
provides a comparative list of outreach and education strategies for the last three fiscal years.

Figure 5: IRS Outreach and Education Strategies
FY 2023 FY 2024 FY 2025
Nationwide Tax Forums
Interactive Due Diligence Training Module
Tax Preparer Toolkit
Software Developers Working Group
Tax Preparer Alerts
Refundable Credits Summit
Filing Season Readiness Filing Season Readiness
Webinars Webinars
Tax Professional Awareness
Week
Dependent Database Meeting
Source: FYs 2023 through 2025 Treasury Department AFRs.

Additionally, the IRS uses social media to share updates on tax changes and scam
alerts, promote online account tools, and provide other informational content regarding
refundable credit eligibility. We found that the IRS can improve its use of social media strategies
by leveraging paid services to reach additional taxpayers and expand its messaging surrounding
refundable credit eligibility and compliance.
As of May 2025, the IRS indicated that it had approximately 1.5 million followers on its various
social media platforms. Additionally, for FY 2025, the IRS reported that 2 percent of posts
(178 out of 8,246 posts) on five different social media platforms were related to the refundable
credit programs.
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Assessment of Fiscal Year 2025 Compliance With Improper Payment Reporting Requirements

The IRS Communications and Liaison’s Social Media Branch does not pay social media platforms
for visibility, promotion, outreach, or activity of any kind. The Social Media Branch indicated it
does not have the legislative authority to use appropriated funds for social media promotion or
paid marketing to disseminate information. Additionally, the IRS indicated that Communications
and Liaison does not have funding allocated for paid marketing purposes.
The annual appropriations language states that,
No part of any appropriation contained in this or any other Act shall be used directly or
indirectly, including by private contractor, for publicity or propaganda purposes within
the United States not heretofore authorized by Congress.
While the appropriations language does not provide a definition of either term (i.e., publicity or
propaganda), the Government Accountability Office has identified three activities that are
prohibited by the annual appropriation’s language, including: 1) self-aggrandizement, 2) covert
propaganda, and 3) purely partisan materials. It is not clear if paying to disseminate
informational content to taxpayers would fall into these categories.
The IRS General Legal Services indicated that so long as there is a logical relationship between
the IRS’s mission and outreach activities and the activities would not fall within any of the above
three prohibitions, the IRS generally has flexibility to spend money on advertisement for public
outreach. They indicated that fact-specific determinations could be made accordingly for the
purposes of paid social media outreach.
We believe the IRS is missing the opportunity to expand its reach to taxpayers via social media.
If complex eligibility requirements are a factor in the IRS’s improper payments error rates,
increasing communications to taxpayers beyond those who currently follow its social media
platforms, may help reduce improper claims.
In 2024, research indicated that 68 percent of Americans (232 million) used social media.
Additionally, social media has become a growing channel of communication and information
sharing. According to the Pew Research Center, about half of U.S. adults report getting news
from these platforms. Increasing the IRS’s social media content and expanding its distribution to
educate taxpayers on refundable credit eligibility increases awareness and potentially
compliance in these areas.

The Chief, Communications and Liaison, should:
Recommendation 4: Use funding to distribute social media content for refundable credits
beyond current followers and increase taxpayer and preparer awareness of the refundable tax
credit eligibility requirements.
Management’s Response: IRS management agreed with this recommendation and will
analyze and assess current social media content to determine if funding is necessary to
increase taxpayer and preparer awareness of refundable tax credit eligibility
requirements.
Recommendation 5: Monitor the paid social media distributions to determine the impact and
effectiveness, and inform future decisions on educational outreach.
Management’s Response: IRS management agreed with this recommendation. If funds
are expended on paid social media activity, the IRS will monitor the results to inform
future decision-making.
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Assessment of Fiscal Year 2025 Compliance With Improper Payment Reporting Requirements

Appendix I
Detailed Objective, Scope, and Methodology
The overall objective of this audit is to determine whether the IRS complied with the annual
improper payment reporting requirements for FY 2025. To accomplish our objective, we:
· Obtained and reviewed the information the IRS provided to the Department of the
Treasury for inclusion in the AFR to determine if information was provided to satisfy the
reporting requirements.
· Evaluated the adequacy of the IRS’s FY 2025 risk assessment for the IRS revenue
program funds identified by the Department of the Treasury.
· Identified the IRS’s efforts to reduce improper payment rates.

Performance of This Review
This review was performed with information obtained from the Office of the Chief Financial
Officer, Research Applied Analytics and Statistics, Return Integrity and Compliance Services, and
Communications & Liaison located at the IRS National Headquarters in Washington, D.C. during
the period October 2025 through July 2026. We conducted this performance audit in
accordance with generally accepted government auditing standards. These 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.

Data Validation Methodology
During this review, we obtained data from the published FY 2025 AFR. We also obtained
information from the IRS, which included metrics from Taxpayers Services Refundable Credits
Program Management and the Compliance Data Warehouse in the form of analyzed results. We
performed tests to assess the reliability of data reported by the IRS. We evaluated the data by
(1) reviewing various sources for consistent reporting, (2) evaluating the data logic for accuracy,
and (3) interviewing agency officials knowledgeable about the data. We did not test IRS systems
or perform data analyses in this audit. We determined that the data 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 controls established to
ensure IRS compliance with PIIA improper payment reporting requirements. We tested these
controls by reviewing reports, analyzing support documents, and meeting with IRS officials.

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Assessment of Fiscal Year 2025 Compliance With Improper Payment Reporting Requirements

Appendix II
Additional Guidance for Improper Payments
In addition to PIIA, improper payment reporting is also governed by or related to the following
guidance:
Ø Executive Order 14247, Modernizing Payments To and From America’s Bank
Account , effective March 25, 2025, mandates the transition to electronic payments for all
federal disbursements and receipts by digitizing payments to the extent permissible
under applicable law. The phase out of paper checks for all federal disbursements and
receipts was effective as of September 30, 2025. The executive order addresses the
increase in mail-theft complaints since the pandemic. In addition, Department of
Treasury checks are 16 times more likely to be reported lost or stolen, returned
undeliverable, or altered than Electronic Funds Transfer.
Ø Executive Order 14249, Protecting America’s Bank Account Against Fraud, Waste,
and Abuse, effective March 25, 2025, enables the Department of Treasury to more easily
conduct improper payment and fraud prevention screening before disbursing funds on
behalf of agencies. It requires agencies to provide the Department of Treasury with
information needed to track transactions through the United States General Fund in
greater detail. This executive order was implemented due to the lack of sufficient
controls to track transactions flowing through the General Fund to determine if they
were proper. Agencies' past underinvestment in technology and longstanding challenges
with access to accurate data have prevented them from more fully safeguarding taxpayer
dollars against fraud and improper payments.
Ø OMB Circular A-136, Financial Reporting Requirements , effective on July 14, 2025,
includes guidance to federal agencies that are required to report improper payments.
The circular states that agencies must include a link to PaymentAccuracy.gov and provide
a summary of its payment integrity activities and results in its AFR or Performance and
Accountability Report.
Ø OMB Circular A-123 Appendix C, Requirements for Payment Integrity
Improvement , issued on March 5, 2021. Appendix C provides agencies and Inspectors
General with guidance on improper payment determinations and reporting. Every year,
each agency Inspector General must review its agency’s improper payment reporting in
the AFR and any accompanying material, such as that provided on
www.paymentaccuracy.gov, to determine if the agency complies with improper payment
legislation and OMB guidance.

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Assessment of Fiscal Year 2025 Compliance With Improper Payment Reporting Requirements

Appendix III
Programs Identified for Improper Payment Risk Assessments
The Treasury Department identified the following IRS programs for improper payment risk
assessments for FY 2025.

Figure 1: IRS Programs Identified for Risk Assessments
Treasury Fund Risk Assessment
IRS Program
Symbol Determination
Build America Bonds and Recovery Zone Economic
20X0935
Development Bonds

Qualified School Construction Bonds 20X0946

New Clean Renewable Energy Bonds 20X0947

Qualified Energy Conservation Bonds 20X0948
Not susceptible
Energy Security 20X0958

Advanced Manufacturing Investment Credit 20X0962

Elective Credit for Energy Property and Electricity
20X0963
Produced

Clean Vehicle Credit 20X0964

Credit for Previously Owned Clean Vehicles 20X0965
Source: IRS Office of the Chief Financial Officer.

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Assessment of Fiscal Year 2025 Compliance With Improper Payment Reporting Requirements

Appendix IV
Management’s Response to the Draft Report

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Appendix V
Abbreviations

ACTC Additional Child Tax Credit
AFR Agency Financial Report
AOTC American Opportunity Tax Credit
EITC Earned Income Tax Credit
FY Fiscal Year
IRS Internal Revenue Service
OMB Office of Management and Budget
PIIA Payment Integrity Information Act
PTC Premium Tax Credit
TIGTA Treasury Inspector General for Tax Administration

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To report fraud, waste, or abuse,
contact our hotline on the web at
https://www.tigta.gov/reportcrime-misconduct.

To make suggestions to improve IRS policies, processes, or systems
affecting taxpayers, contact us at
TIGTACommunications@tigta.treas.gov.

Information you provide is confidential, and you may remain anonymous.

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