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$28.1 billion: Refundable tax credits paid out in error
About one in four dollars of the IRS's refundable tax credits went out improperly in fiscal 2025.
FraudBadPublic receipt
Internal Revenue Service
Internal Revenue Service
- Improper payments, refundable credits, FY2025≈$28.1B1
- Improper payment rate, FY202526.5%1
- Improper payment rate, FY202421.9%1
- Earned Income Tax Credit, yearly cost (FY2026)$67B3
- Fraud vs. honest mistakes████████████████
fraudbad.comNo taxation without receipts
What happened
The Treasury Department's tax watchdog reported in July 2026 that improper payments on the IRS's refundable tax credits rose to about $28.1 billion in fiscal 2025.
The error rate climbed from 21.9 percent to 26.5 percent in one year. GAO lists the Earned Income Tax Credit among the five programs holding 73 percent of all federal improper payments.
Why nobody caught it
- Eligibility rules are complicated, and much of what decides eligibility can't be checked before the refund goes out.
How sure are we?
Paid without proof
Officially counted as paid in error or without the records to prove it was right. Some is fraud. Nobody has measured how much.
Improper payments include honest mistakes. Nobody has split out how much is fraud.
Sources
- IRS improper payments on tax credits increased last year (TIGTA review)Accounting Today · Jul 2026
- GAO reports improper payments rose to an estimated $186 billion in fiscal year 2025U.S. Government Accountability Office · Apr 27, 2026
- JCT projects tax expenditures will be $2.3T in 2026Committee for a Responsible Federal Budget · Feb 9, 2026
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