IRS may have mistakenly donated millions for 20% QBI tax deduction: report

The IRS has allowed business owners to claim $ 57 million in “potentially erroneous” deductions on 12,980 tax returns filed last year, according to a report released Tuesday by the Inspector General of the Treasury for the FISC administration.

The watchdog urged the tax agency to increase its oversight of the pass-through deduction.

It is not entirely clear why the Inspector General of the Treasury reported these tax returns to the IRS. Many details were redacted in the report, which analyzed 2019 tax returns filed through April 16 of last year.

The analysis also highlights the high frequency of errors compared to tax returns claiming a passed-on deduction, according to Steven Rosenthal, senior researcher at the Urban-Brookings Tax Policy Center.

For example, when the IRS selected 68 tax year 2018 returns for further review, the agency ultimately denied a deduction passed on to 85% of them, worth about $ 4.8 million. dollars, according to the report.

“It’s a rich vein for the IRS to prospect because, so far, the IRS is gaining dirt [almost] every time, ”Rosenthal said.

“I think QBI is written in a very complicated way, with exceptions to exceptions,” he said of the inference and why errors can occur.

The IRS and Inspector General of the Treasury have been contacted but have not responded to a request for comment at the time of this article’s publication.