The IRS has long cited refundable credits as an abuse area, because the credits can reduce a taxpayer's total tax liability to zero, plus provide a cash payment for any remaining credit amount. According to a 2012 report by the Treasury Inspector General for Tax Administration, the IRS estimates that since 2003, between $99 billion and $119 billion has been erroneously paid in the Earned Income Tax Credit, which is one of the most prominent refundable credits.
Because of this report and other like it, we expect that audits will increase.
