An email from the Treasury Inspector General for Tax Administration with a subject line reading, “Both the IRS and Taxpayers Are Having Difficulty Complying With New Laws,” contains the following news (major FAILs bolded by yours truly):

TIGTA’s report, “Interim Results of the 2010 Filing Season,” found that implementation of two significant tax laws (The American Recovery and Reinvestment Act of 2009, or “Recovery Act,” and the “Worker, Homeownership, and Business Assistance Act of 2009”) has caused confusion, resulting in taxpayers making errors in claiming Recovery Act credits on their tax returns; delays in processing tax returns; and erroneous payments by the IRS.

TIGTA auditors analyzed 2010 filing season results as of the first week of March, 2010. As of that time, the IRS had paid some $24.2 million in erroneous Making Work Pay and Government Retiree Credits and improperly awarded some $4.7 million in erroneous Plug-in Vehicle Credits. The IRS estimates that 50 percent of the individuals claiming the First-Time Homebuyer Credit will not attach the required documentation this year.

The report further found that the IRS is grappling with glitches in its Modernized e-File system. Errors in the IRS’s Modernized e-File system are limiting its utility and causing it to erroneously reject returns. While the IRS had estimated that 5.9 million tax returns would be processed through March, the system had successfully processed only 98,596 returns as of March 5. Tax returns are erroneously rejected from the system and the number of returns processed is significantly lower than expected, according to the report.

But the news isn’t all bad! The IRS is not, you know, totally incompetent!

As of March 5, 2010, the IRS had identified 119,484 tax returns with $733 million in fraudulent refunds and prevented the issuance of some 98 percent ($721 million) of those refunds.

Great job, IRS! Happy tax day!