IRS will likely lose Billions on Erroneous Amended Tax Returns

The IRS received over 4 million amended tax returns in fiscal year 2012.
TIGTA’s review of a statistical sample of 259 amended tax returns claiming tax refunds of $500 or more in FY 2012 identified 44 tax returns, that is, 17 percent, 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 tax returns during FY 2012. Thus, the IRS could issue an estimated $2.1 billion or more in potentially erroneous tax refunds claimed on amended tax returns over the next five years.
In addition, TIGTA estimates that allowing taxpayers to amend their tax return by e-filing a modified Form 1040 could have potentially saved more than $17 million in processing costs during fiscal year 2012.
While the IRS disagreed with revising Form 1040, the IRS plans to consider changing the format and appearance of Form 1040X.
The IRS also said it plans to consider e-filing of amended tax returns based on its available funding and resources. The IRS reviewed the 44 potentially erroneous refund returns and generally agreed that procedures were not correctly followed for those identified as having processing errors.