WASHINGTON, D.C. The Internal Revenue Service gave away $318 million in improper refunds this year because a computer program that screens tax returns for fraud wasn't working, according to a report released Friday.
The estimate by the Treasury Inspector General for Tax Administration is slightly higher than the IRS's own calculation. The tax agency thought it had paid out $200 million to $300 million in improper refunds.
In the study, the inspectors found the IRS spent more than $20 million on the failed computer project, which should have delivered a new version of the fraud-detection program early this year.
The IRS had contracted with Computer Sciences Corp. to update the program, but the contractor could not produce a working program by the deadline.
The refund fraud program had stopped $412 million in fraudulent returns in 2005.