The report by the Treasury Department’s inspector general for taxes found that for the first five months of 2010, $2.6 billion went to 1.7 million taxpayers for students for whom the IRS lacked documents showing that they attended school.
More than 2 million taxpayers – including some prisoners claiming students as dependents – apparently wrongly collected $3.2 billion in college tax credits last year, according to a report issued Thursday by a federal investigator.
The suspect credits represent more than a fifth of the $15.5 billion in college credits the report says went to nearly 8.9 million taxpayers through 2010.
The Internal Revenue Service disputed the findings, saying they were vastly overblown and based on a faulty analysis. The IRS, though, agreed to implement many of the recommendations the report made to ensure that only eligible taxpayers receive the credit.
The program in question is the American Opportunity Tax Credit, created in President Barack Obama’s $825 billion economic stimulus law of 2009 as an expansion of the Hope Scholarship Tax Credit. Extended by Congress last year through 2012, it provides students with tax credits of up to $2,500 annually, as long as their families don’t exceed income limits.
[…]
