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Business and Policy Areas
Business and Policy Areas

TIGTA Report Slams IRS on Erroneous Claims for Education Tax Credits

May 18, 2015

An estimated 3.6 million taxpayers received more than $5.6 billion in potentially erroneous education credits on their 2012 tax returns, according to a report published by the Treasury Inspector General for Tax Administration (TIGTA).

TIGTA audits from 2011 and 2012, which also revealed billions of dollars of erroneous education tax credits, made recommendations to the Internal Revenue Service in an effort to limit the number of incorrect or fraudulent claims. The recent audit was conducted to follow up on IRS efforts to improve detection and prevention of questionable claims.

According to the 2015 TIGTA report:

  • More than 1.7 million (49 percent) of the returns filed by 3.6 million taxpayers with questionable claims were prepared by tax return preparers.
  • More than 2 million taxpayers received more than $3.2 billion in education credits for students for whom no 2012 1098-T was filed with the IRS by a postsecondary institution.
  • More than 1.6 million taxpayers received an estimated $2.5 billion in education credits but listed an ineligible institution on the Form 8863 (such as pre-K, elementary, or private high school)
  • More than $650 million was received by students who claimed the American Opportunity Tax Credit (AOTC) for more than four years. AOTC eligibility is restricted to a maximum of four tax years.
  • Almost half a million taxpayers received approximately $662 million in AOTCs for students who attended college less than half time (and would therefore be ineligible for the credit).

The report makes numerous recommendations related to the IRS enhancing its ability to verify taxpayer-provided information. More troublesome is a recommendation for Treasury to consider a legislative proposal that would move the required filing date for Forms 1098-T to January 31, so that information could help identify improper education credit claims when tax returns are processed.

The IRS agreed with this recommendation, indicating that the administration's budget requests included a proposal to move the filing date for all information returns (with limited exceptions) to January 31. Congress has not addressed the proposal, which would likely be opposed by numerous industries and stakeholders responsible for information reporting.


Mary Bachinger
Director, Tax Policy

Anne Gross
Vice President, Regulatory Affairs