Understanding Improper Payments at the IRS: What Every American Should Know

Did you know that the IRS made nearly $21.4 billion in improper payments during fiscal year 2024? That’s right—billions of taxpayer dollars were sent out incorrectly. Whether it's paying too much, paying the wrong person, or making a payment that should never have happened, these are called improper payments, and they affect all of us.

Let’s break down what this means, why it matters, and what the IRS—and we as taxpayers—can do to help fix the problem.

What Are Improper Payments?

An improper payment happens when money is sent out by the government that should not have been paid or was paid in the wrong amount. These errors can come from:

• Overpayments
  
  
• Underpayments
  
  
• Payments to the wrong person
  
  
• Payments with missing or wrong information
  
  

When the IRS (Internal Revenue Service) makes improper payments, it can cause confusion, delays, and big financial problems for both the government and the people who rely on accurate tax refunds or credits.

Why Are Improper Payments a Big Deal?

Improper payments might sound like small mistakes, but they add up quickly. In 2023 alone, the IRS’s improper payment rate was over 16% for the Earned Income Tax Credit (EITC)—one of the highest of all federal programs.

This matters because:

• It wastes taxpayer money.
  
  
• It can delay refunds for people who need them.
  
  
• It causes more work and stress for the IRS and taxpayers.
  
  
• It damages trust in the system.
  
  

The government uses these numbers to measure how well programs are working. A high improper payment rate means that there are too many errors.

What Causes Improper Payments at the IRS?

Improper payments don’t always happen because someone is trying to cheat the system. In fact, many are honest mistakes. Some common reasons include:

1. Complicated Tax Rules

Programs like the Earned Income Tax Credit have complicated rules. Taxpayers might not understand if they qualify, and even small errors can lead to improper payments.

2. Missing or Incorrect Information

Sometimes people file tax returns with missing Social Security numbers or the wrong income details. If the IRS doesn’t catch the error in time, it might send out a payment it shouldn’t.

3. Identity Theft and Fraud

Criminals sometimes file fake tax returns using stolen identities. If the IRS pays out before catching the fraud, that’s an improper payment.

4. Technology and Processing Delays

Outdated systems at the IRS make it hard to check everything in real time. By the time an error is found, the payment is already out the door.

Which IRS Programs Have the Most Improper Payments?

According to recent reports, some IRS programs have very high error rates. Here are a few examples:

• Earned Income Tax Credit (EITC): Around 33.5% improper payment rate
  
  
• American Opportunity Tax Credit (AOTC): Around 31.6% improper payment rate
  
  
• Additional Child Tax Credit (ACTC): Around 14.5% improper payment rate
  
  

These credits help millions of Americans, but the high error rates mean that billions of dollars might be going to people who don’t qualify—or not going to the right people at all.

How Is the IRS Fixing the Problem?

The IRS knows that improper payments are a serious issue. Here are some ways they are trying to fix it:

1. More Staff and Training

The IRS has hired more workers and given them better tools to check tax returns more carefully.

2. Better Technology

They are upgrading their computer systems to spot errors and fraud more quickly. This includes using AI (artificial intelligence) and data matching tools.

3. Education for Taxpayers

The IRS is working to give people clearer instructions and help to avoid errors when filing.

4. Stronger Rules

New laws and rules are being introduced to improve how the IRS checks eligibility for tax credits.

How Can Taxpayers Help?

As a taxpayer, you can also play a role in reducing improper payments. Here’s how:

Double-check Your Return

Make sure all your information is correct—especially Social Security numbers, income, and credit qualifications.

Use a Trusted Tax Professional

Working with a licensed tax preparer can reduce mistakes and help you avoid trouble.

Keep Good Records

Save your receipts, income documents, and other important paperwork. If the IRS needs proof, you’ll be ready.

File on Time

Late or rushed filings are more likely to have errors. File early and carefully.

Why Should You Care?

You might be thinking, “This doesn’t affect me—I file my taxes correctly.” But here’s the truth:

• Improper payments waste your tax dollars
  
  
• They can lead to delays in refunds
  
  
• They make it harder for the IRS to serve everyone fairly
  
  

When billions go out in error, it hurts the entire system. Every American has a stake in making sure government payments are handled properly.

What Happens If You Get an Improper Payment?

If you accidentally receive a tax credit or refund you weren’t supposed to get, the IRS will usually send you a notice. You might have to:

• Pay it back
  
  
• Face interest or penalties
  
  
• Provide proof that you were eligible
  
  

Ignoring these notices can cause bigger problems, so it’s important to act fast and talk to a tax attorney or expert if you’re not sure what to do.

The Role of Tax Attorneys

If you're unsure about a payment you received or you’re being asked to return money to the IRS, a tax attorney can help. They understand tax law, can review your case, and may be able to reduce or eliminate penalties.

At Florida Tax Lawyers, our team can help you navigate issues with improper payments and communicate with the IRS on your behalf.

Final Thoughts

Improper payments may seem like just numbers in a report, but they affect real people and real dollars. Whether it’s a single missing detail or a large-scale fraud case, every improper payment chips away at the system we all depend on.

By understanding what improper payments are and how to avoid them, we can all help create a stronger and more accurate tax system.

Need help dealing with an IRS notice or tax issue? Contact Florida Tax Lawyers today for expert support.