Billions of Dollars in Potentially Erroneous Education Credits Continue to Be Claimed for Ineligible Students and Institutions

The Commissioner, Wage and Investment Division, should coordinate with the Department of Education to determine the feasibility of using Department of Education data, including but not limited to the Postsecondary Education Participants System database, to verify the eligibility of educational institutions shown on tax returns for the purposes of claiming education credits. Coordination efforts should include an assessment of the reliability and sufficiency of the data available.

The Commissioner, Wage and Investment Division, should, if the IRS determines external data are sufficiently reliable, develop processes to verify education credit claims at the time tax returns are processed.

The Commissioner, Wage and Investment Division, should coordinate with the Department of Treasury Office of Tax Policy to consider a legislative proposal to move the required filing date for Forms 1098-T to January 31 so that this information can be used at the time tax returns are processed to help identify improper education credit claims.

The Commissioner, Wage and Investment Division, should establish Automated Questionable Credit Program filters to identify tax returns on which the student claimed has already exceeded the four year American Opportunity Tax Credit limit for pre-refund treatment.

The Commissioner, Wage and Investment Division, should modify existing filters used to identify erroneous education credit claims made by taxpayers to include all returns on which the students are prisoners and establish processes to identify and address such claims before the tax refunds are issued.