TH News Release Date: 7/16/14 IRS Loses Billions on Amended Returns Cross References • Treasury Inspector General for Tax Administration, Report #2014-40-028, April 25, 2014 A recent report from the Treasury Inspector General for Tax Administration (TIGTA) found that the IRS needs to modernize its processing for amended tax returns to reduce erroneous refunds, processing costs, and taxpayer burden. Taxpayers file Form 1040X, Amended U.S. Individual Income Tax Return, to correct previously filed income tax returns. Claims filed on an amended tax return can relate to any item of income, loss, exclusion, deduction, or credit and may result in a tax refund. The IRS only allows amended tax returns to be filed on paper. Asa result, there is additional taxpayer burden and increased potential for erroneous tax refund payments. The IRS received more than 4 million amended tax returns in fiscal year 2012.TheTIGTA audit was initiated because previous audits have identified problems with IRS processes for verifying claims on amended tax returns. The objective of this audit was to determine whether the IRS has controls in place to ensure that claims for refunds on amended tax returns are appropriate. TIGTA found that a statistical sample of 259 amended tax returns claiming tax refunds of $500 or more in fiscal year 2012 identified 44 (17%) tax returns for which the IRS issued potentially erroneous tax refunds totaling $103,270. Based on the sample results, TIGTA estimates the IRS may have issued more than $439 million in potentially erroneous tax refunds claimed on 187,421 amended returns in fiscal year 2012. As such, the IRS could issue more than $2.1 billion in potentially erroneous tax refunds claimed on amended tax returns over the next five years. To reduce erroneous refunds, processing costs, and taxpayer burden, the IRS could revise Form 1040, U.S. Individual Income Tax Return, to allow for corrections to original tax return filings and expan