- The IRS paid two hundred thirteen million dollars in improper E-I-T-C claims using nonwork Social Security Numbers.
- Total improper E-I-T-C payments reached twenty-one billion dollars in fiscal year twenty twenty-five alone.
- New twenty twenty-six regulations will bar non-qualified aliens from claiming refundable tax credits as federal benefits.
The Internal Revenue Service (IRS) paid nearly all of the $219 million in Earned Income Tax Credit claimed through nonwork Social Security Numbers, a Treasury watchdog found, underscoring the agency’s difficulty stopping improper payments before money leaves the government.
The Treasury Inspector General for Tax Administration (TIGTA) reported May 4 that about 67,000 returns for Tax Years 2023 and 2024 improperly claimed the credit using nonwork SSNs. The agency paid nearly $213 million of those claims.
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The audit examined whether reliable data could help identify ineligible EITC claims. It found that the IRS lacked an efficient way to verify eligibility before issuing refunds.
The figures cover a broad pool. As of March 2025, roughly 2.4 million nonwork SSNs belonged to noncitizens.
TIGTA also found that the credit’s overall error rate remained high. In Fiscal Year 2025, the IRS estimated that $21.1 billion, or about 33%, of $64.7 billion in total EITC payments were improper.
The watchdog tied payment errors to weak eligibility data
The findings appear in TIGTA Report No. 2026-4S0-022, titled “Reliable Data Is Needed To Effectively Reduce Improper Earned Income Tax Credit Payments for Nonwork Social Security Numbers.” The report said the agency could not efficiently identify and block claims from ineligible recipients.
Kenneth Corbin, chief of the IRS Taxpayer Services Division, said updated information could change that process.
“Having timely, updated, reliable eligibility information would enable immediate eligibility determinations and would avoid costly, resources intensive, post-filing determinations.”
Corbin’s response, dated May 8, focused on the timing of eligibility checks. The agency currently relies on determinations made after filing in some cases, according to the audit’s findings.
That weakness became entangled with an effort to share taxpayer information with the Department of Homeland Security and U.S. Immigration and Customs Enforcement. The arrangement was intended to support automated eligibility checks, but a federal court later found repeated unlawful disclosures.
A court found 42,695 unlawful address disclosures
In February 2026, U.S. District Judge Colleen Kollar-Kotelly ruled that the IRS violated federal law 42,695 times by improperly sharing taxpayer addresses with ICE. The affected taxpayers included people who used Individual Taxpayer Identification Numbers, or ITINs.
About 47,000 individuals had their last known addresses shared with ICE because of automated matching errors. The disclosures raised concerns about using tax records for immigration enforcement.
A DHS spokesperson said information sharing helps agencies identify people in the country, assess public safety and terrorism threats, remove people from voter rolls, and determine which public benefits non-qualified aliens use at taxpayer expense.
The data-sharing arrangement also exposed security weaknesses. TIGTA Report 2026-IE-R010, issued June 4, found that the DHS component handling sensitive tax information fell short of required safeguards. The report linked those weaknesses to the inadvertent disclosure of thousands of records.
The two reports describe separate problems that affected the same broad goal: using government data to prevent ineligible payments. One involved the quality and availability of eligibility information. The other involved how agencies handled taxpayer records.
Proposed 2026 rules would classify refundable credits as benefits
A Treasury Notice dated November 20, 2025, announced upcoming regulations that would classify refundable tax credits as “federal public benefits.” The regulations would bar “illegal aliens and other non-qualified aliens” from receiving those credits beginning in tax year 2026.
The proposed change would place additional pressure on eligibility systems. Claims involving nonwork SSNs and ITINs would face scrutiny as agencies prepare for the new classification.
The audit’s numbers show why verification remains a central issue. The agency identified tens of thousands of questionable returns, but paid nearly the entire amount claimed through them.
Staffing losses added pressure during the 2026 filing season
The payment findings came as the agency managed a sharp workforce decline. TIGTA Report No. 2026-108-011 found a 30% reduction in the IRS workforce between January 2025 and January 2026.
The agency also fell short of its hiring goals. By the end of the 2026 filing season, it faced a 2.4 million-return backlog.
Processing delays and eligibility reviews compete for the same administrative capacity. The reported staffing losses therefore affected more than payment controls, extending to the handling of tax returns during the filing season.
Treasury Secretary Scott Bessent defended the administration’s fraud-prevention campaign July 21. He said Treasury had met a promise to strengthen payment controls.
“Treasury has delivered on a key promise. to stop improper payments and fraud before money leaves the Treasury, and strengthen the integrity of the federal payment system.”
The TIGTA audits show the limits of that objective in the EITC program. The IRS estimated billions of dollars in erroneous payments for Fiscal Year 2025, while a separate review found that data-sharing safeguards failed when agencies exchanged sensitive taxpayer information.
The May audit’s central remedy was better eligibility data before payment. The June report adds a condition: agencies must protect the tax information used to make those decisions.
The announced regulations would begin applying in tax year 2026, adding a new eligibility standard to an already strained system.
