IRS improperly paid out $132 billion in tax credits: Report

The Earned Income Tax Credit is one of the biggest anti-poverty programs in the U.S. and it's meant for poor working families. But a new report from the Treasury Department's Inspector General finds the IRS routinely pays more than $11 billion dollars a year to people who don't actually qualify.

According to the report, improper payments in the past decade, from 2003 through 2012, totaled up to $132.6 billion dollars, peaking during the 2010 economic crisis at $18.4 billion dollars.

The report says the IRS was unable to show it has taken proper steps to fix the problem after the inspector general flagged it in 2008.

Here's how the tax credit works: low income working families get a credit that reduces their tax bill. The size of the credit depends on their income and number of children. If the credit is larger than what they owe, or they pay no taxes, they get a cash payment. The program was expanded as part of the Obama administration's stimulus.

This year, a married couple with three children can earn up to $51,567 dollars and qualify for a maximum $6,044 dollar tax credit.

The inspector general found up to one-fourth of the tax dollars is given to people who don't qualify. The report said the problem is a mix of fraud and honest families having trouble calculating the credit.

The IRS said it can't audit all 27 million families who claim the credit. The tax agency added that it prevents $4 billion in improper claims each year and is committed to expanding that.