Rogers expects 'heads to roll' at IRS

House Appropriations Committee Chairman Hal Rogers (R-Ky.) expects "heads to roll" at the Internal Revenue Service (IRS) over billions of dollars in improper refunds.

Rogers told Treasury Secretary Jack Lew on Thursday that he was appalled at an IRS inspector general report that found the agency had overpaid up to $13.6 billion in low-income tax credits. The overpayments accounted for nearly one-quarter of the tax credits issued under the Earned Income Tax Credit (EITC), according to the IRS.

"Twenty-one percent is unacceptable," he said. "That's one out of every five dollars is faulty. I expect heads to roll on this one. This is too big to fail, if you will."

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On Monday, the Treasury Inspector General for Tax Administration released its report. It noted that the fiscal 2012 overpayment was among the lowest for the agency in a decade, but that regular overpayments for the EITC are still "one of the largest of all federal programs."

The amount of EITC overpayments is roughly equivalent to one month of sequestration cuts. To turn off sequestration for the remaining five months of fiscal 2013 would cost $68 billion, or $13.6 billion a month.

The refundable credit, calculated to be based on income and family size, allows low-income working families and individuals to pay less in federal taxes or receive a refund. Economists claim the program has lifted millions out of poverty, and the program has enjoyed bipartisan praise.

Rogers was not critical of the credit, but was furious over how much of the money had been "thrown down the drain."

Lew told him that there has been "substantial progress" in reducing errors, and called for some perspective on the issue.

"I think that we need to take a step back and remember that in the context of the Earned Income Tax Credit, which is one of the most effective programs that we've had in getting people off of welfare [and] on to work since the Nixon administration — it is a very complicated program," he said.

Lew also noted that those seeking the credit usually must go through tax preparers, and that the Treasury is working with those preparers to reduce errors.

"We are committed to reducing error rates throughout our enforcement of the tax code, not just with regard to these tax credits but with regard to corporate taxes and regards to the tax deductions and credits taken by high-income taxpayers," he said.

—Erik Wasson contributed to this report.